ABSTRACT
The idea that demand-side deficiencies can provide an inducement for outward investments by transnational corporations (TNCs) has never acquired much currency. This is despite its long history and the fact that existing theories often have implications supportive of it. Arguably, a reason for this is that the idea had never been subjected to rigorous empirical testing. In this chapter we report some econometric evidence in favour of this view. The next section critically surveys and attempts to synthesize the mainstream microeconomic or supply-side theories of the TNC. The subsequent section examines the case for a demand-side perspective, links this to the supply side and discusses some existing indirect evidence in support of this perspective. The discussion then focuses on direct evidence in favour of the demand-side perspective. The final section presents conclusions and policy implications.
