《國(guó)際經(jīng)濟(jì)關(guān)系》Chapter4

Chapter4TheMultinationalCorporationandGlobalGovernanceAmultinationalcorporation(MNC)isanenterprisethatengagesinforeigndirectinvestmentandthatownsorcontrolsvalue-addedactivitiesinmorethancountry.Thedegreeofmultinationalityofaspecificfirmcanbeassessedinanumberofways.

Firmsareconsideredtobemoremultinationalif(1)theyhavemanyforeignaffiliatesorsubsidiariesinforeigncountries(2)theyoperateinawidevarietyofcountriesaroundtheglobe(3)theproportionofassets,revenues,orprofitsaccountedforbyoverseasoperationsrelativetototalassets,revenues,orprofitsishigh(4)theiremployees,stockholders,owners,andmanagersarefrommanydifferentcountries(5)theiroverseasoperationsaremuchmoreambitiousthanjustsalesoffices,includingafullrangeofmanufacturingandresearchanddevelopmentactivities.

Multinationalcorporationsfinancesomeportionoftheiroverseasoperationsbytransferringfundsfromthecountryoftheparentfirmtothecountryofthehostfirm.Thistransferiscalledforeigndirectinvestment.ThischapterfocusesonfactorsinfluencingFDIflowsandtheexpansionofMNCactivitiesamongtheindustrializedcountries.一、COMMONCHARACTERISTICSOFMNCSMultinationalcorporationsareamongtheworld’slargestfirms.(1)MNCswerenotsimplylargecorporationsthatmarketedtheirproductsabroad;theywerefirmsthatsentabroadapackageofcapital,technology,managerialtalent,andmarketingskillstocarryoutproductioninforeigncountries.(2)Jointventuresandlicensingwereoptionsavailabletomultinationalswhowantedtodobusinessabroadwithoutbeingthesoleownerofaforeignsubsidiary.(3)AnotheroptionforMNCsincertainindustrieswasthestrategicalliance.(4)Decisionmakingformultinationalstendstobecentralized.(5)Anotherorganizationalcharacteristicistheintegrationofproductionandmarketingonaninternationalscale.(6)Multinationalsoftenaremobileandflexible.(7)ThespecialcharacteristicsofMNCscancauseconflictswithstates,andtheirinternationalscopehasbeenknowntocreatepoliticalproblems.二、TRENDSINFDIANDOTHERMNCACTIVITIESTherapidspreadofmultinationalcorporations,andespeciallyofUSmultinationals,hasbeencharacteristicofthecontemporaryworldeconomy.ForthemostparttheaggregatetrendininflowsofFDIworldwidemirroredthatofoutflows.WhileindustrializednationswerebyfarthemainsourcesanddestinationsofFDIoutflows,developingnationssteadilyincreasedtheirshareoftotalFDIinflows.Thetop500MNCsaccountedforover90percentofglobalFDIandmorethanhalfofworldtradebythelate1990s.Ofthetop500MNCs,441wereheadquarteredinthetriadcountriesofNorthAmerica,WesternEurope,andJapan.TheFDIoutflowsandinflowsofthefivelargestindustrializeeconomiesfluctuatedwidelyinrecentyears.Intheearly1980s,thenetincreaseofforeignassetsintheUnitedStatesbegantoexceedthenetincreaseinUSassetsabroad,atrendthatcontinuedwithsomevariationthroughthe1990s.SeveralreasonsexistedfortheincreasedinterestofforeigncorporationsininvestmentopportunitiesintheUnitedStates.(1)onewastheincreasedsizeandaggressivenessofnon-USfirms.(2)anotherreasonswasthatthedeclineofthedollarinthe1970sandthelate1980sbroughtdownthecostofacquiringUSfirms,makingthemmoreattractiveacquisitionsforforeigncorporation.(3)afurtherincentivetoinvestintheUSwasgrowingtradefrictionsandprotectionistpressuresinvulnerablesectors.thisproductionsguaranteedaccesstothehugeUSmarket.(4)foreigninvestorswereattractedbythehugeUSmarketandbythepoliticalstabilityoftheUS,especiallycomparedwiththatofmanydevelopingcountries.summarizeOneofthebigchangesduringtheperiodofinterdependencewastheincreasedroleofEuropeandJapaningeneratingoutflowsofFDI.AllthreemajorindustrializeregionsrapidlyincreasedtheirFDIoutflows,butonemajorindustrializedcountry,Japan,stoodoutasattractingconsiderablylowerinflowsthantheothers.EuropeandtheUnitedStatesconsideredthistobeevidencethatsignificantbarrierstoFDIinflowscontinuedtoexistinJapan,eventhoughtheJapanesegovernmenthaddismantledmostlegalbarriers.三、EXPLAININGTHEGROWTHINMNCACTIVITYAnumberoftheorieshavebeenusedtoexplaintheenormousexpansionofMNCactivityinthepastthreedecades.TheoriesaboutFDIthatdonottakeintoaccountthefirm-levelincentivestoinvestoverseasarenotlikelytobeveryhelpfulinexplainingthetrends.Weturn,therefore,toasetoftheoriesthatdealwiththisveryissue.InternalizationtheoryInternalizationtheorycontendsthatfirmsexpandabroadinorderto“internalize”activitiesinthepresenceofmarketimperfectionsjustastheyexpanddomesticallyforsimilarreasons.Theparticularmarketimperfectionsthatcreateincentivesforinternalizationarerepresentedintheideaoftransactioncosts.OLIMODELOLIMODEL--Anexpandedversionofinternalizationtheorysuggeststhatthreeconditionsmustbemetbeforeafirmwillbeabletocompetewithlocalfirmsdespitethedisadvantagesofbeingforeign:(1)itmusthavemarketpowerthatderivesfromownershipofsomespecializedknowledge(2)itmustconsidertheparticularforeignlocationadvantageousfornewinvestmentsrelativetoalternativelocationsincludingitshomemarket(3)itmustpreferFDIoverexportingandlicensingbytheusualinternalizationlogic.ProductcycletheoryTheproductcycletheoryarguesthatfirmsexpandabroadwhentheirprincipalproductsbecome“mature”indomesticmarkets.<first>Duringtheinitialorrapidgrowthstageofproductcommercializationthefirmattemptsmainlytorespondtodomesticdemand.<second>Asgrowthtapersoff,thefirmmaybegintolookfornewsourcesofdemandinexportmarkets.<third>Eventually,domesticdemandbeginstofallasthemarketissaturatedandnewfirmbegintochallengetheearlierentrantstothemarket,andthefirmlooksforwaystoprotectitsrevenuesandprofitsbyestablishingforeignsubsidiarieswithlowerfactorcostssoastoremaincompetitiveinthehomemarketandtogarnerbetteraccesstoforeignmarkets.ObsolescingbargaintheoryInobsolescingbargaintheory,afirmthathasinvestedinahostcountrystartwithagoodbargainingpositionwiththehostcountry’sgovernmentbecauseoffirm-specificadvantagessuchassuperiortechnology,accesstocapitalmarkets,andaccesstofinalproductmarkets.OligopolytheoryTheoligopolytheoryofforeigninvestmentcontendsthatfirmsmoveabroadtoexploitthemonopolypowertheypossessthroughsuchfactorsasuniqueproducts,marketingexpertise,marketingexpertise,controloftechnologyandmanagerialskills,oraccesstocapital.ThistheoryisconsistentwiththeOLImodelinthatOLImodelassertsthatafirmmusthavesomesortofmarketpowerderivedfromfirm-specificadvantages.Thetariff-jumpinghypothesisThetariff-jumpinghypothesishasbeenusedrecentlytoexplaintheincreasedwillingnessofJapaneseandUSMNCstoinvestinIrelandandtheUnitedKingdom.ThishypothesisisconsistentwiththeOLImodelbecausetheexistenceoftheEU,withitshighexternaltariffsandlowinternalones,givesalocationaladvantagetorelativelylow-wagecountrieswithintheEU.TheimportanceofthehomecountryMarkeddifferencesinthebehaviorofMNCsfromdifferenthomecountriessuggestthatthewayinwhichthehomecountrystructuresitsdomesticeconomyhasanimportantimpactonthewayinwhichdomesticfirmsinternationalizetheirbusinessactivities.DespitethefactthatmosteconomictheoriesofMNCbehaviorseemtoimplythatthehomecountrycontextshouldbelargelyirrelevant.四、TheconsequencesofMNCactivityAdvantagesThepotentialgainsfromFDIfallintothreemaincategories:First,FDImayfacilitatetradeingoodsandservicesbyallowingfirmstocompensateformarketimperfectionsbyengagingininternationalintrafirmtrade.Second,FDImayincreasetheproductivityoffirmsthataredirectlyengagedinFDI,especiallythosethataretherecipientsofFDIinflows.Third,FDImaygeneratepositiveexternaleconomiesthatbenefitfirmsandothereconomicactorsthatarenotdirectlyengagedinFDI.DisadvantageCriticsofmultinationalcorporationsbelievethatinflowsofFDImayreduceefficiencyandstiflegrowthinhostcountries.CriticsarguethatMNCsactuallymayhindernationalgrowthandeconomicprosperitybyabsorbinglocalcapitalinsteadofprovidingnewcapital,byapplyinginappropriatetechnology,bycreatingbadjobsinsteadofgoodjobs,bydoingresearchinthehomecountryinsteadofinthehostcountryandbyemployingexpatriate,notindigenous,managers.MNCsinEuropeThe1981CabornreportadoptedbytheParliamentoftheEuropeanCommunity,whichcalledforgreaterregulationofmultinationalcorporations,foundthatmultinationalenterprisesraisethelevelofworldeconomicactivityandhavefavorableimpactsonproductivity,growthratesandoveralllevelofemployment,onthedisseminationofnewproductsandprocessandalsoofmanagerialknow-how.NationalEconomicControlAsecondareaofpotentialconflictistheinterferenceofMNCsinthenationalcontroloftheeconomy.Theconcernwithnationalcontrolisrevealedinthestudiesofeliteandpublicattitudestowardforeigninvestment.Thesenseoflostcontrolreflects,decisionscrucialtothenationaleconomyaremadeoutsidethenation.WhereasMNCshaveplayedanimportantroleinachievingnationalgoals,aconcernhasarisenthattheyarelessresponsivetonationaleconomicplanningthanaredomesticallyownedfirmsoperatinginthenationalmarket.AgreaterconcernisthatMNCsmayevadenationaltaxation.Anotherdimensionofinterferenceisnationalorder.InterferencebyhomegovernmentsofmultinationalsAnotherdimensionoftheproblemofcontrolisnotthethreatfromthemultinationalitselfbutfromthemultinational’shomegovernmenttothehostcountry,primarilythethreatfromtheUnitedStatestothehostcountriesofU.Smultinationalcorporations.SuchextraterritorialinterferenceoccurswhenU.SlawsareappliedbeyondU.SbordersthroughsubsidiariesoftheMNC.MultinationalsandtheNationalPoliticalProcessOnefinalbutimportantareainwhichmultinationalcorporationsmayinterfereisinthepoliticsofthehomeandhoststates.Aswithanycorporationinthehomeorhostcountry,themultinationalispotentiallypowerfulpoliticalactorthatcan,andattimesdoes,seektoinfluencelawandpublicpolicyandthatdoeshaveanimpactonthepoliticalenvironment.MNCsmightattempttoinfluencepoliticsinhostcountriesinseveralways.Inthemostcase,MNCsmightoverthrowanunfriendlygovernmentorkeepafriendlyregimeinpower.五、INTERNATIONALREGIMESFORFOREIGNDIRECTINVESTMENTAsmultinationalshavebecomemoreimportantandbetterunderstood,thetrendtowardliberalizingregulationsonmultinationalshasbeenechoedthroughouttheNorthernstates,aswillbeseeninthefollowingdiscussionsofnational,regional,andinternationalmanagement.NationalGovernanceThemostimportantformofregulationisthecontrolofinitialcapitalinvestment.Becausethedevelopedmarketeconomieshavebeenunwillingtorestrictthemultinationalcorporationstooseverely,manydevelopedcountrieshavetriedtominimizethecostsofhostingMNCsinotherways.Methodsincludegovernmentalfinancialassistance,taxpreference,governmentparticipationinindustry,encouragementofmergers,financingofresearchandtrainingprograms,and“buynational”procurementpolicies.RegionalGovernanceRegionalcommonmarketsandfreetradeareashaveprovidednewopportunitiesforregionalgovernanceofmultinationalcorporations.Withinthecontextofsuchagreementsthereisroomforsubstantialcontrolorliberalizationofinvestmentpolicies.OnepotentiallyimportantregionalforumforthemultinationalgovernanceofMNCsistheEU.InternationalGovernanceInternationalregulationsandagreementsencouragedthegrowthofFDIandscopeofoperationsofMNCs.Throughoutthe1950sandearly1960s,ado-nothingattitudeprevailed.Inthelate1960s,asconcernincreased,morecomprehensiveproposalsforasystemofinternationalcontrolweredrawnup.GovernanceintheOECDTheOECDhasbeenanotherforumfordevisingaregimeforinternationalinvestment.Atfirst,OECDmembersliberalizedonlylong-termcapitalmovements.Itwasnotuntilthe1980sthattheOECDbegantore