Multinationals and Development

Multinationals and Development

Alan M. Rugman
Jonathan P. Doh
Copyright Date: 2008
Published by: Yale University Press
Pages: 256
https://www.jstor.org/stable/j.ctt1njmmv
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  • Book Info
    Multinationals and Development
    Book Description:

    This book offers a fresh perspective on the role of multinational enterprises (MNEs) in development. Alan M. Rugman and Jonathan P. Doh challenge traditional assumptions about economic development and address the controversies that surround MNEs. For example, how do foreign multinationals affect overall economic growth in emerging economies, and how does this process lead to the subsequent rise of new emerging-economy MNEs?

    The authors focus on the mechanisms by which MNEs influence economic development. They evaluate the impact of MNEs on the processes and outcomes of development, as well as the influence of civil society, NGOs, and government policies on multinationals, especially in Asia. And they discuss the rise of emerging-economy MNEs from Asian economies, especially "yang" MNEs from China and Korea. Arriving at a far more nuanced understanding of MNEs today, the authors also offer observations about the role of multinationals in the future.

    eISBN: 978-0-300-15050-6
    Subjects: Economics

Table of Contents

  1. Front Matter
    (pp. i-iv)
  2. Table of Contents
    (pp. v-vi)
  3. Preface
    (pp. vii-viii)
  4. Acknowledgments
    (pp. ix-x)
  5. Chapter 1 Introduction to the Key Issues
    (pp. 1-10)

    The impact of multinational enterprises (MNEs) on host country development is an important but controversial topic. For more than half a century, this subject has generated considerable disagreement among researchers and practitioners—those directly engaged in international development policy, finance, and multinational management strategy. In its simplest form, one side in this debate has hailed the foreign direct investment (FDI) undertaken by MNEs for inducing economic growth by complementing domestic savings, transferring technology and management skills, and increasing competition. On the other side, some have argued that MNEs crowd out local firms, use technology that is inappropriate for local circumstances,...

  6. Chapter 2 Foreign Direct Investment and Development
    (pp. 11-31)

    In this chapter, we introduce our analytical framework for understanding the interactions between advantages and resources at the country level and those at the firm level. We term these advantages “country-specific advantages” (CSAs) and “firm-specific advantages” (FSAs), respectively. In its simplest form, the development impact of MNEs in developing countries has to be understood as the interaction of these two sets of factors. Next, we briefly review the literature on FDI and development, focusing on research related to spillovers, technology transfer, and linkages. Finally, we review key data on FDI and development to provide an empirical context for our subsequent...

  7. Chapter 3 Multinational Enterprise Strategies and Development
    (pp. 32-58)

    In this chapter, we draw from literature in corporate strategy and international business across three dimensions. First, we review the competing perspectives on MNE strategies and operations in developing countries. Second, we introduce a framework for understanding the strategic choices of Western MNEs (from the triad) and the response to those strategies by firms in developing countries with small open economies. By small open economies, we mean all “non-coretriad” economies (where the core triad consists of the huge markets of the European Union, the United States, and Japan). Third, we discuss the ways in which MNE activities contribute to development....

  8. Chapter 4 The Role of International Institutions
    (pp. 59-82)

    Since the founding of the modern international economic system at the Bretton Woods conference in July 1944, the World Bank, the IMF, and the GATT (since 1995, the WTO) have played a pivotal role in advancing the process of development. The summary of agreements from July 22, 1944 , states, “The nations should consult and agree on international monetary changes which affect each other. They should outlaw practices which are agreed to be harmful to world prosperity, and they should assist each other to overcome short-term exchange difficulties” (U.N. Monetary and Financial Conference 1944, par. 3). The International Bank for...

  9. Chapter 5 The Contributions and Impact of Civil Society
    (pp. 83-102)

    The emergence of civil society and NGOs has had an important impact on how MNEs contribute to development. On the one hand, criticisms of globalization and MNEs by many NGOs have created friction and pressure on MNEs to be more responsive to the range of stakeholders they encounter in their global activities. On the other hand, many MNEs and NGOs are forging new partnerships in which they jointly advance initiatives designed to promote sustainable development.

    In this chapter, we review the emergence of civil society and NGOs as important actors in international development. We introduce a classification of NGOs to...

  10. Chapter 6 Institutional Governance and Development
    (pp. 103-123)

    The importance of institutions and governance to growth and development is widely accepted. North (1986, 1993b) argues that institutional stability, fairness, and predictability are critical for economic growth. Such institutional environments are demonstrated by a wellspecified legal system, a clearly defined and impartial third (judicial) branch of government to enforce property rights, and a set of attitudes toward contracting and trading that encourage people to engage in transactions at low costs.

    Conversely, the absence of institutional structures that facilitate interactions, such as rule of law, a good quality bureaucracy, and low levels of corruption in government, results in significantly higher...

  11. Chapter 7 Multinational Enterprises from Emerging Economies
    (pp. 124-152)

    In this and the two succeeding chapters, we turn our attention to the process of FDI and MNE activity in the emerging economies of Asia. Here we use the term “emerging economies” (versus “developing economies”) to emphasize those countries that have broken out of a larger collection of developing economies and established impressive economic growth and substantially improved incomes. Much has been written about the Asian “economic miracle.” In these three chapters, we explore the dynamics of MNE investment, host-country policy, and the development of indigenous regionally based MNEs as the critical variables that have produced that miracle. An innovative...

  12. Chapter 8 Multinationals and Development in Asia
    (pp. 153-178)

    In this chapter we continue our focus on FDI and MNE activities in the emerging economies of Asia. This chapter follows the logic of the previous chapter, in that outward FDI is shown to be a useful tool for economic development. Here we turn to a broader analysis of MNEs from all of Asia, in particular, adding the Japanese MNEs to the MNEs from China and Korea discussed in the previous chapter. We discuss certain MNEs in detail to understand their business strategies and impact on development. We build on prior empirical work that shows that the majority of the...

  13. Chapter 9 Yang Multinationals
    (pp. 179-199)

    In this chapter, we discuss the potential of yang MNEs to contribute to the positive transformation of the development patterns of countries.Yangis a Chinese philosophical expression indicating a positive force, in contrast to the negativeyinforce. Byyang MNEs,we mean sunshine multinationals that bring happiness and joy through economic development and prosperity. More specifically, we refer to outward FDI by MNEs from China, the Republic of Korea, Singapore, and Taiwan (the major Asian-based emerging economy MNEs). We will discuss the role of yang MNEs as instruments for economic development in Asia.

    Today public policy toward FDI...

  14. Chapter 10 Conclusions
    (pp. 200-204)

    In this book we have demonstrated that MNEs unambiguously contribute to the economic development of nations, although the distribution of those benefits may vary. MNEs bring foreign direct investment, transfer technology, increase national income, provide more skilled jobs, pay taxes, and otherwise contribute to the overall macroeconomic growth of host economies. In an interesting and novel twist to this, we also find that MNEs from emerging economies build on the improved macroeconomic infrastructure created by foreign MNEs. These new indigenous emerging economy MNEs grow and help improve the prosperity of their countries. We found evidence of these yang MNEs in...

  15. Glossary
    (pp. 205-208)
  16. References
    (pp. 209-230)
  17. Index
    (pp. 231-242)