Multinational corporations often are the targets of human and labor rights activists. Whereas some activists view MNCs as partners in corporate social responsibility efforts, the relationship more often is an adversarial one. Labor rights activists are suspicious of MNCs’ commitments to improving workers’ rights, and they often treat MNCs as agents of repression in developing nations.

The activists, in fact, may have a point. Indeed, some types of global production in which MNCs are involved have negative consequences for workers’ rights. We observe these most easily where subcontracting and arm’s-length relationships with suppliers are the tools of market entry. In these situations, the cost concerns associated with global competition can generate downward pressures on labor standards. The activists’ point lacks nuance, however, as this downward pressure is only part of the story. Directly owned production often has positive consequences for labor rights, as MNCs bring their best practices to their subsidiaries, and as MNCs strive to hire and retain the most productive workers in host economies.