Multinational enterprises (MNEs) often arrive in emerging economies carrying the aura of modernity by bringing capital, technology and the promise of integration into global markets. Yet their presence is a double-edged sword. This chapter unpacks the complex role of MNEs as both engines of innovation and gatekeepers of knowledge. On the one hand, they can inject much-needed dynamism into host economies, introducing advanced practices and linking local firms to global value chains. On the other, their dominance often limits the diffusion of knowledge, creating dependencies rather than capabilities. Local firms may find themselves trapped as suppliers of low-value tasks, while strategic decision-making and core technologies remain tightly guarded within headquarters abroad. The narrative highlights how the contribution of MNEs depends on local absorptive capacities, institutional frameworks and policy choices. Ultimately, MNEs can be catalysts or constraints, transformative partners or monopolisers of opportunity, in the fragile balance of innovation systems.