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Multinational enterprises and the global economy

Author: Dunning, John H. ; Lundan, Sarianna M.Publisher: Edward Elgar , 2008.Edition: 2nd ed.Language: EnglishDescription: 920 p. : Ill. ; 25 cm.ISBN: 9781847201225Type of document: BookBibliography/Index: Includes bibliographical references and index
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Includes bibliographical references and index

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Multinational Enterprises And The Global Economy
Contents
List of figures xv
List of tables xvi
List of boxes xviii
List of abbreviations xix
Acknowledgements xxi
Introduction to the second edition xxii
PART I FACTS, THEORY AND HISTORY
1 Definitions and sources of data 3
1.1 The nature of a multinational enterprise 3
1.1.1 A working definition 3
1.1.2 The distinctive features of an MNE 5
1.1.3 Forms of foreign involvement by MNEs 7
1.2 Measuring the extent and pattern of multinational activity 9
1.2.1 Sources and types of data 9
1.2.2 Deficiencies in the quality of statistical data on FDI 12
1.2.3 Size and stability of foreign investment flows 15
2 The extent and pattern of foreign direct investment 17
2.1 Introduction 17
2.2 A general overview 17
2.2.1 The position in the beginning of the 21st century 17
2.2.2 General trends 19
2.3 The leading outward investors 23
2.3.1 The facts 23
2.3.2 The significance of outward direct investment to home
countries 27
2.4 The leading inward investors 29
2.4.1 The facts 29
2.4.2 The significance of inward direct investment for host countries 33
2.5 The balance between outward and inward direct investment 34
2.6 The sectoral composition of outward and inward investment 35
2.6.1 The main orders of economic activity 35
2.6.2 The composition of FDI within broad industrial sectors 38
2.7 Some country-specific differences in the geography of foreign
investment 48
2.7.1 Outward direct investment 48
2.7.2 Inward direct investment 49
2.8 The world's leading MNEs 54
2.8.1 The transnationality index 61
2.8.2 The rise and decline of state-owned enterprises 61
3 The motives for foreign production 63
3.1 Introduction 63
3.2 Why do firms wish to engage in foreign production? 63
3.3 The main types of foreign production 67
3.3.1 The natural resource seekers 68
3.3.2 The market seekers 69
3.3.3 The efficiency seekers 72
3.3.4 The strategic asset seekers 72
3.3.5 Other motives for MNE activity 74
3.4 The political economy of outward FDI 77
3.5 Conclusions 78
4 Theories of foreign direct investment 79
4.1 Introduction 79
4.2 Theories of the MNE and MNE activity: 1960-76 82
4.2.1 Prior to the 1960s 82
4.2.2 The contribution of Hymer 83
4.2.3 The product cycle 85
4.2.4 Follow-up developments 86
4.2.5 Other theoretical contributions: a selected view 89
4.3 General explanations of MNE activity 93
4.3.1 Internalisation theory 93
4.3.2 The eclectic or OLI paradigm 95
4.3.3 A macroeconomic approach to understanding MNE
activity 109
4.4 A note on an evolutionary approach to explaining MNE activity 111
4.5 Issues resolved and unresolved by received theory 113
5 The determinants of MNE activity: the OLI paradigm revisited 116
5.1 Introduction 116
5.2 New theoretical perspectives 117
5.2.1 Cooperative relationships and I advantages 117
5.2.2 The resource-based view and dynamic 0 advantages 120
5.2.3 The knowledge-based theory of the firm and dynamic
0 advantages 122
5.3 Institutions in international business 123
5.3.1 Why focus on institutions? 125
5.3.2 Institutions in the international business literature 126
5.4 Incorporating institutions into the OLI paradigm 129
5.4.1 Institutions defined 129
5.4.2 Ownership-specific advantages 131
5.4.3 Locational factors 137
5.4.4 Internalisation factors 140
5.4.5 Propositions regarding institutional transfer and change 142
5.5 Conclusions 143
6 The emergence and maturing of international production: an
Historical excursion 145
6.1 Introduction 145
6.2 Colonising and merchant capitalism 146
6.3 The early 19th century: the forerunners of the modern MNE 149
6.3.1 Introduction 149
6.3.2 The individual entrepreneurs 150
6.3.3 The finance capitalists 151
6.3.4 The embryonic MNEs 152
6.4 From 1870 onwards: the modern MNE emerges 154
6.4.1 New technological and organisational advances 154
6.4.2 Market-seeking investments 157
6.4.3 Resource-seeking investments 163
6.4.4 Other investments 170
6.4.5 The position prior to 1914: a résumé 172
6.5 The maturing of foreign production: 1918-39 176
6.5.1 Introduction 176
6.5.2 Market-seeking investments 179
6.5.3 Resource-based investments 183
6.5.4 Other investments 183
6.5.5 The inter-war years: conclusions 184
6.6 The early post-war period: 1945-60 185
6.6.1 Some facts 185
6.6.2 Changes in the organisation of international business 186
6.6.3 Changes in locational determinants 188
6.7 Towards the globalisation of production: 1960-2000 189
6.7.1 Introduction 189
6.7.2 Changes in organisational form 191
6.7.3 Recent locational changes 194
6.8 Conclusions 196
PART II INSIDE THE MULTINATIONAL ENTERPRISE
7 Entry and expansion strategies of MNEs 201
7.1 Introduction 201
7.2 The concept of business strategy 202
7.3 The value-added chain 205
7.3.1 Some general principles 205
7.3.2 Value-added networks and MNE activity 206
7.4 Analysis of the internationalisation process 212
7.4.1 Introduction 212
7.4.2 Learning in the internationalisation process 212
7.4.3 A network approach to the multinational firm 213
7.4.4 Phase 1: exports and foreign sourcing 215
7.4.5 Phase 2: investment in marketing and distribution 218
7.4.6 Phase 3: foreign production of intermediate goods and services 221
7.4.7 Phase 4: deepening and widening of the value-added network 223
7.4.8 Phase 5: the integrated network multinational 227
7.5 Conclusions 231
8 The organisation of MNE activity: the internal network 233
8.1 Introduction 233
8.2 The organisational function: some general observations 234
8.2.1 The need for an organisational structure 234
8.2.2 Strategic responses to organisational needs 236
8.3 Organisational structures of MNEs 238
8.3.1 Some general points 238
8.3.2 Organisational governance of domestic firms 239
8.3.3 The impact of internationalisation on organisational
governance, 241
8.3.4 The organisational structure of global firms 243
8.3.5 Organisational structures: a résumé 248
8.4 The locus of decision making 249
8.4.1 Introduction 249
8.4.2 An economic approach to decision making 250
8.4.3 A strategic approach to decision making 252
8.5 Affiliate roles and evolution 253
8.5.1 Introduction 253
8.5.2 Affiliate autonomy 254
8.5.3 Knowledge transfer 256
8.6 Conclusions 258
9 The organisation of MNE activity: the external network 260
9.1 Introduction 260
9.2 The spectrum of organisational modes: cooperation and
competition 260
9.3 Cooperative agreements: some theoretical and methodological
considerations 264
9.3.1 Transaction costs and resource attributes 264
9.3.2 Some methodological issues 267
9.4 Joint equity ventures 269
9.4.1 Why do firms enter into joint ventures? 269
9.4.2 When are joint ventures likely to succeed? 272
9.4.3 Cultural and institutional influences in joint ventures 274
9.4.4 Concluding remarks 275
9.5 Non-equity cooperative agreements 277
9.5.1 Buyer/seller agreements 277
9.5.2 Strategic alliances 281
9.6 The choice between acquisitions, alliances and greenfield
investment 286
9.7 A note on cross-border cartels and collusion 287
9.8 Conclusions 289
PART III THE IMPACT OF MNE ACTIVITY
10 FDI, growth and development 295
10.1 Introduction 295
10.2 A new paradigm of development 297
10.3 Institutions and economic growth 300
10.3.1 Formal institutions 301
10.3.2 Informal institutions and social capital 304
10.4 Institutional quality and the ability to attract FDI 308
10.4.1 Good governance 309
10.4.2 Bad governance 310
10.4.3 Conclusion 314
10.5 Economic growth and inbound FDI 314
10.5.1 How does FDI affect growth? 315
10.5.2 Empirical evidence 316
10.5.3 Conclusions 317
10.6 The OLI paradigm revisited 318
10.6.1 0-specific advantages 320
10.6.2 L-specific advantages 323
10.6.3 I-related advantages 327
10.7 The investment development path 330
10.7.1 Stages of the IDP 330
10.7.2 Institutions and the IDP 336
10.8 Conclusions 338
11 Technology and innovatory capacity: the role of firms 340
11.1 Introduction 340
11.1.1 Direct and indirect effects 341
11.1.2 Some stylised facts 342
11.1.3 Some definitions and a taxonomy of technology 343
11.2 The distribution of technological capacity 345
11.2.1 R&D expenditures 345
11.2.2 Training of scientists and engineers 349
11.2.3 Patenting 351
11.2.4 Royalties and licence fees 354
11.3 The impact of MNEs on host country technological capacity 356
11.3.1 Share of foreign affiliates in funding and performing R&D 358
11.3.2 R&D intensity of foreign affiliates 360
11.3.3 Spillovers to local firms 361
11.4 The transfer and adaptation of technology by MNEs 362
11.4.1 Market size and characteristics 363
11.4.2 Factor availability and price differentials 364
11.4.3 Institutional and cultural differences 366
11.5 Motivation, type and organisation of affiliate R&D 368
11.5.1 Motivations for affiliate R&D 369
11.5.2 Types of R&D performed by affiliates 370
11.5.3 Organisation of affiliate R&D 372
11.6 The internationalisation of corporate R&D 374
11.6.1 Diversification and the technological profiles of MNEs 374
11.6.2 How international is corporate R&D? 376
11.7 External technology sourcing by MNEs 378
11.7.1 Motivations for R&D alliances 378
11.7.2 Trends in alliance activity 379
11.7.3 Choice between alliances and acquisitions 381
11.8 Conclusions 381
12 Technology and innovatory capacity: the role of government 383
12.1 Introduction 383
12.2 The role of government in host countries 383
12.2.1 The ability of governments to affect indigenous
technological capacity 384
12.2.2 Strategies of host governments 388
12.2.3 Developing countries and technological capabilities 397
12.3 The role of government in home countries 400
12.3.1 Effects of asset-exploiting investment 401
12.3.2 Effects of asset-augmenting investment 405
12.3.3 FDI as a means of domestic technological restructuring 409
12.4 Conclusions 411
13 Employment and human resource development 414
13.1 Introduction 414
13.2 Theoretical underpinnings 416
13.2.1 What is distinctive about MNEs? A reprise 416
13.2.2 A methodological note 419
13.3 Employment in MNEs 420
13.4 The employment effects of MNE activity on home countries 425
13.4.1 Earlier empirical evidence on home country employment
effects 428
13.4.2 Recent empirical evidence on home country employment
effects 430
13.4.3 The effects of outsourcing 433
13.4.4 Conclusions 435
13.5 The employment effects of MNE activity on host countries 436
13.5.1 Earlier empirical evidence on host country effects on
employment and wages 438
13.5.2 Wages, productivity and skills: recent evidence 441
13.5.3 Conclusions 443
13.6 Employment conditions 444
13.6.1 The training practices of MNEs 444
13.6.2 Working practices and standards 450
13.6.3 Labour-management relations 452
13.7 ILO core labour standards 454
13.7.1 Sweatshops and EPZs 456
13.7.2 Child labour 458
13.8 MNEs and human resource development: some policy
considerations 459
14 The balance of payments and the structure of trade 463
14.1 Introduction 463
14.2 A methodological note 464
14.2.1 Measuring the direct effects of MNE activity 464
14.2.2 Assessing the opportunity cost of external transactions
by MNEs 466
14.3 Measuring the transactions of MNEs 469
14.3.1 Identifying and evaluating the transactions in the home and
host countries: some analytical issues 469
14.3.2 Some empirical results: home countries 474
14.3.3 Some empirical results: host countries 478
14.4 Intra-firm trade 482
14.4.1 The determinants of intra-firm trade 482
14.4.2 Empirical evidence of the extent of intra-firm trade 484
14.4.3 The implications of intra-firm trade 489
14.5 MNEs and the structure of trade 490
14.5.1 The distribution of MNE activity across sectors 491
14.5.2 The export intensity of foreign affiliates and indigenous firms 493
14.6 A policy footnote 496
14.6.1 Macroeconomic policies and MNEs 496
14.6.2 The stability of the global financial system 498
14.7 Conclusions: the evolution of trade and FDI linkages 500
15 Market structure, performance and business practices 503
15.1 Introduction 503
15.2 A conceptual framework 504
15.3 MNEs and allocative efficiency 506
15.3.1 Inter-sectoral efficiency 507
15.3.2 Intra-sectoral efficiency 511
15.3.3 Effects on the home country 513
15.3.4 Conclusions 516
15.4 MNEs and technical efficiency 517
15.4.1 Evidence of productivity gaps 518
15.4.2 The impact of acquisitions on productivity 523
15.4.3 Evidence of profitability gaps 524
15.5 MNEs and market structure 530
15.5.1 Market concentration 531
15.5.2 Product differentiation 537
15.5.3 Entry and exit barriers 538
15.5.4 Competitive effects and crowding out in the host
market 539
15.6 Conduct and business practices of MNEs 542
15.7 Conclusions 548
16 Linkages, spillovers and clustering 551
16.1 Introduction 551
16.2 Backward and forward linkages to local firms 554
16.2.1 Backward linkages to local suppliers 554
16.2.2 Forward linkages with customers 569
16.2.3 Effects on the productivity of local suppliers 573
16.3 The spillover effects of MNE activity 579
16.3.1 Some general remarks 579
16.3.2 How might indigenous firms be affected? 580
16.3.3 Some issues of measurement 582
16.3.4 Earlier econometric evidence of productivity spillovers 584
16.3.5 Recent econometric evidence of productivity spillovers 585
16.3.6 Some policy considerations 592
16.4 Clustering of economic activity 593
16.4.1 Introduction 593
16.4.2 MNE location choice and agglomeration 594
16.4.3 Measuring agglomeration 597
16.4.4 Knowledge spillovers and agglomeration 599
16.4.5 Regions and innovation 600
16.4.6 A note on policy 602
16.5 Summary and conclusions 603
17 Distribution of the value added created by MNEs 606
17.1 Introduction 606
17.2 The impact of government policy on national value added
by MNEs 608
17.2.1 A host country perspective 608
17.2.2 A home country perspective 610
17.2.3 Recent trends in corporate taxation 612
17.2.4 The response of MNEs to taxation differentials 614
17.2.5 National tax strategy in a global economy 619
17.3 Transfer pricing 620
17.3.1 Introduction 620
17.3.2 The motivation for TPM 621
17.3.3 The opportunities for transfer pricing 623
17.3.4 The constraints on TPM 624
17.3.5 The evidence for TPM 625
17.4 Policies of governments towards TPM 629
17.4.1 Unilateral policies 629
17.4.2 Supranational action 633
17.4.3 Indirect economic effects of TPM 634
17.4.4 Challenges for the future 635
17.5 Conclusions 635
18 Political, cultural and social responsibility issues 637
18.1 Introduction 637
18.2 MNEs and sovereignty 638
18.2.1 Economic welfare and sovereignty 638
18.2.2 Economic autonomy and/or independence 639
18.3 MNEs and strategic interests 642
18.3.1 National security 643
18.4 The cultural and institutional influence of MNEs 647
18.5 MNEs and corporate social responsibility 649
18.5.1 Introduction 649
18.5.2 The 'business case' for social responsibility 650
18.5.3 Whose standards should apply? 653
18.5.4 Evidence on the contribution of MNEs to social issues 655
18.5.5 Limits to the market for virtue 658
18.6 Conclusions 660
PART IV IMPLICATIONS FOR POLICY
19 Governments and MNE activity: the unilateral response 665
19.1 Introduction 665
19.2 Some theoretical issues 666
19.2.1 A further application of the OLI paradigm 666
19.2.2 A schematic framework 668
19.2.3 A bargaining model 670
19.3 Interaction between host governments and MNEs 674
19.3.1 The changing scenario over the past 40 years 674
19.3.2 Policies specifically directed to affect inward direct
investment 681
19.3.3 General policies of host governments as a consequence
of the growth of inward direct investment 688
19.4 Actions of home governments towards outward direct
investment 691
19.5 The changing political economy of foreign investment 694
19.5.1 Sovereignty at bay in the digital economy 694
19.5.2 States, firms and civil society 696
19.6 The case of extra-territoriality: how might home/host
differences be reconciled? 697
19.6.1 Introduction 697
19.6.2 Export embargoes 698
19.6.3 Application of anti-trust policy 700
19.6.4 Responsibility for human rights violations 702
19.6.5 Other areas of conflict 703
19.7 Conclusions 704
20 Governments and MNE activity: the multilateral response 707
20.1 Introduction 707
20.2 Multinational actions to assist the bargaining power of host
countries 708
20.2.1 Collective action by countries 708
20.2.2 Assisting national governments to re-evaluate their domestic
policies 709
20.2.3 Codes and guidelines 710
20.2.4 A new international governance structure? 712
20.3 Collective investment supporting or market-facilitating schemes 712
20.4 Regional integration 714
20.4.1 Introduction 714
20.4.2 The determinants of the international allocation of economic
activity 715
20.4.3 The role of MNEs in influencing the international
allocation of activity 717
20.4.4 Recent efforts at regionalisation 719
20.4.5 Regional agreements and the multilateral system 721
20.5 Setting the conditions for international investment: the role
of multilateral institutions 722
20.5.1 Investment-related measures under the WTO 722
20.5.2 The prospects for a multilateral agreement on investment 726
20.5.3 Commitments under the Kyoto protocol 728
20.6 Conclusions: towards a new multilateral governance 730
PART V LOOKING AHEAD
21 The future of MNEs in a global economy 735
21.1 Introduction: the five stages in the evolution of the global
economy 735
21.1.1 Stage 1: up to 1914 735
21.1.2 Stage 2: Inter-war years 736
21.1.3 Stage 3: 1945 to late 1960s 737
21.1.4 Stage 4: from late 1960s to mid-1980s 738
21.1.5 Stage 5: mid-1980s to date 739
21.2 The determinants of international production: a reprise 740
21.3 Contemporary developments 742
21.3.1 Technological advances 742
21.3.2 Economic development 745
21.3.3 New organisational forms 748
21.3.4 The role of government 750
21.4 Challenges for scholarship in the 21st century 758
21.5 Conclusions 761
Notes 765
References 817
Index 891

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