Multinational Corporations in the Global Economy

Multinational corporations sit at the intersection of production, international trade, and cross-border investment. A multinational corporation is “an enterprise that engages in foreign direct investment (FDI) and o ns or controls value adding activities in more than one countr!" (Dunning #$$%, %). M&'s thus have t o characteristics. First, the! coordinate economic production among a number of different enterprises and internali(e this coordination problem ithin a single firm structure. )econd, a significant portion of the economic transactions connected ith this coordinated activit! ta*e place across national borders. +hese t o attributes distinguish M&'s from other firms. ,hile man! firms control and coordinate the production of multiple enterprises, and hile man! other firms engage in economic transactions across borders, M&'s are the onl! firms that coordinate and internali(e economic activit! across national borders. It is difficult to e-aggerate the importance of M&'s in the contemporar! global econom!. In discussing M&'s it is t!pical to distinguish bet een parent firms, the corporate o ner of the net or* of firms comprising the M&', and the foreign affiliates, the multiple enterprises o ned b! parent firms. +his basic terminolog! allo s us to gain a sense of the role that M&'s pla! in the contemporar! international econom!. According to the .nited &ations 'onference on +rade and Development, there are appro-imatel! /%,01$ parent firms that together o n a total of /2$,134 foreign affiliates. In #$$2 these affiliates emplo!ed appro-imatel! / million people orld ide. +ogether, parent firms and their foreign affiliates produce about 31 percent of orld gross domestic product (.&'+AD 3444). +he importance of multinational corporations is not limited to production, as the! are also significant participants in international trade. It has been

#

estimated that trade ithin M&'s, called intra-firm trade, accounts for about one-third of total orld trade. If e add to this figure the trade that ta*es place bet een M&'s and other unaffiliated firms, then M&'s are involved in about t o-thirds of orld trade.

+hus, M&'s are productive enterprises that b! definition engage in crossborder investment and are heavil! involved in international trade.
,ho are these firms, and here are the! located5 ,hile it is impossible to provide an e-tensive catalog of more than /4,444 firms, table 1.3 does list the orld6s #44 largest M&'s, ran*ed b! their foreign assets. +hese #44 M&'s, among hich are man! familiar names, account for more than #1 percent of all foreign assets controlled b! all M&'s, and for 33 percent of total sales b! M&'s. +hese large M&'s are based almost e-clusivel! in advanced industriali(ed countries7 ninet!-nine of the #44 largest firms are from the .nited )tates, ,estern 8urope, or 9apan and more than 1:/ths of all parent corporations are based in advanced industrial countries (see table 1.%). ;arent corporations are not e-clusivel! a developed countr! phenomenon, ho ever. <ong =ong, 'hina, )outh =orea, >ene(uela, Me-ico, and ?ra(il are also home to M&' parent firms, but these firms are considerabl! smaller than developed countr! firms. @nl! one M&' parent based in a developing countr!, ;etroleos de >ene(uela, ran*s among the orld6s #44 largest. +he fift! largest M&'s from developing countries control onl! A#41 billion of foreign assets, less than ten percent of the assets controlled b! the 14 largest developed countr! M&'s.
+he distribution is reversed hen e consider the affiliates. Developing countries host more than %11,%30 M&' affiliates, hile advanced industriali(ed countries host onl! $0,3/$ (.&'+AD 3444, ##-#%). ,ithin the developing orld, M&' affiliates are

3

#41 /1.4 2#./ 02./ 0#.0 %4 3$.$4/ 3#$.etroleum Automotive 'omputer Automotive Food and ?everages Automotive .1C0 04./ /$.nited )tates 9apan .# %0.# #41.$ %#.etroleum Automotive Food and ?ev 8lectronics .2 %4.# 33. = .204 34#.243 33.1 1C.4 0C. AB Alcatel Country .etroleum Automotive 'hemicals 8lectrical 8Euipment 'hemicals .nited )tates .A./ %4.% 13.2CC 344.0 C3.nited )tates Berman! ) it(erland Berman! .444 #C0.Table 5.$ Foreign Employment ###./ 31./ %4.nited )tates Ital! Berman! ) it(erland Berman! France 9apan &etherlands:.444 #%0.2 0#.nited )tates .4 3$.nited )tates &etherlands:.1 34.4 1C.144 3/3.# %C.etroleum Automotive . Daimler-?en( Mobil Fiat )pa <oechst AB Asea ?ro n ?overi (A??) ?a!er AB 8lf AEuitaine )A &issan Motor .% 03.2: The Fifty Largest MNCs !an"e# by Foreign $ssets %&''() Firm Beneral 8lectric Ford Motor 'ompan! Do!al Dutch )hell Beneral Motors 8--on 'orp +o!ota I?M >ol*s agen Broup &estle ).3 0%.0 ##1 $/.344 $0.2#1 #%%.3 %/.#0# 0#.$ %4./ C/.4 Total $ssets %40.#0$ .* Berman! ) it(erland 9apan 9apan 'anada 9apan Berman! France *n#ustry 8lectronics Automotive .2 %$./ 3#.$ 3#.nilever )iemens AB Doche <olding AB )on! 'orp Mitsubishi )eagram <onda Motor ?M.1 %#.2 3#.1 31.% 34.2%3 3/.4 3C1.003 C0.harmaceuticals 8lectronics Diversified ?everages Automotive Automotive 8lectronics Foreign $ssets $C.2 /C.C 3/.1 C4 10.3 /C.

.1 34/.hilips 8lectronics &etherlands 8lectronics 34.# 31.3%/ .

nited )tates .lc &ovartis )umitomo 'orp 8&I Broup 'hevron 'orp Do 'hemical +e-aco Inc ?'8 Inc Hero- Australia .$ #C./ #/.04% 3%.nited )tates 'anada .3 3C.harmaceutic als Diversified 'hemicals +rading +rading 'hemicals ?everages .C 3/.ac*ard +otal )A Denault )A 'able and . .3 %0.C 11.etroleum 8lectronics .&e s 'orp ./ #/.1 %4./ 32.C %/.1 %3./44 3.% #0.C 0%./#4 )ourceI .2/4 %%./ %#.0 #0./ 11.ont Diageo .oulenc )A >iag )A ?A)F AB Itochu 'orp &assho I ei 'orp Du .ireless .2 #C.% #C.= 9apan France Berman! Berman! 9apan 9apan .nited )tates .4 0$.nited )tates .nited )tates Media Food:+obacco .2 04.# #%.etroleum .0 03.1 3%./44 01.2 1/.hoto 8Euipment 34.lc Mitsui F'o.1 #2.1 3C.etroleum +elecommunication .etroleum 'hemicals . #$$$.C 31.= .4 #$.% #0.C %C.3%$ 2.C #/.harmaceuticals:'hemic als +rading:machiner! .4 #1.$ 3#.4/2 /%.etroleum <e lett-. Gtd Dhone-.C/# C#.nited )tates .C04 3.nited )tates France France .0 %1.= ) it(erland 9apan Ital! .etrloeum Automotive +elecommunication Diversified 'hemicals:./ #0./ #%.hillip Morris ?ritish ./ 3$.0 #/.0 #$.3 #2.$ %3.nited &ations 'onference on +rade and Development.C 3$.

%3# %.e/elope# Economies Western Europe United States Japan .Table 5.22% 3.%%0 #/C 3.#4% %.arent Corporations an# $ffiliates -y !egion .+: .&'+AD 3444.%2C 0.#14 Foreign $ffiliates Locate# in Economy /#.%01 %3C.e/eloping Economies Africa Latin America and Caribbean Asia Central and Eastern Europe )ourceI .arent Corporations -ase# in Economy .//$ 30.124 %.4#$ $. %C.$3C . ##-#%.%#4 3%$.1$0 #$.

For hat specific purposes do firms engage in foreign direct investment5 M&' investment can be divided into three broad categories.C02 M&' affiliates. )econd. During the #$24s and earl! #$$4s. Indeed.$3C affiliates in this region. M&'s invest across borders to gain access to foreign mar*ets. +hirteen countries in 8ast Asia and Gatin America host %%#. +hus. 9apanese % . 'hina alone hosts 3%1. As e sa in chapter four.oland host #%1.nited )tates. the! are misleading to some e-tent. M&'s have also invested heavil! in 8astern and 'entral 8urope during the #$$4s. For e-ample. <ungar!. as table 1. even though there are more affiliates based in developing countries than in advanced industriali(ed countries. M&'s engage in cross-border investment to gain secure access to supplies of natural resources. ith ## of the largest firms engaged in either oil production or mining.highl! concentrated in a relativel! small set of countries. about half of the total affiliates orld ide.hile these figures on the location of affiliates are interesting./2# affiliates.$$C of the affiliates active in this region. the affiliates created in advanced industriali(ed countries tend to be larger and more capital intensive than the affiliates created in developing countries.0 illustrates. petroleum and mining is the third most important industr! represented in the top #44 M&'s. and . First. creating a total of 3%$. . the American copper mining firm Anaconda made large direct investments in mining operations in 'hile in order to secure copper supplies for production done in the . the vast maJorit! of foreign direct investment flo s into advanced industriali(ed countries rather than the developing orld. <ere too affiliates are concentrated in a fe countries7 the '(ech Depublic. Much of the cross-border investment in auto production underta*en ithin the advanced industriali(ed orld fits into this categor!.

&''1 #0 #% #% $ #3 / 3 3 C / 3 0 % C #44 &''( #C #0 ## #4 2 2 / / 0 % % 3 3 # 1 #44 . C2. distribution) and Mining Food. ?everages. refining.tilities Metals Media 'onstruction Machiner!:engineering @ther +otal )ourceI .arts .Table 5.&'+AD 3444.etroleum (e-ploration. +obacco 'hemicals .0: *n#ustry Composition of the Top &11 MNCs 8lectronics:electrical eEuipment:computers Motor >ehicle and .harmaceuticals Diversified +elecommunications +rading Detailing .

M&'s ma*e cross-border investments to improve the efficienc! of their operations. During the #$/4s.and Berman automotive M&'s such as +o!ota. the auto industr! is the second most heavil! represented industr! among the largest M&'s. In the auto industr!. firms allocate different elements of the production process to different parts of the orld. In electronics and computers as ell as in the auto industr!. and the more labor-intensive assembl! of the individual components into automobiles is performed in developing countries. and Mercedes built production facilities in the . ?M. electronics. As table 1. b! rationali(ing production and tr!ing to e-ploit economies of speciali(ation and scope. hile the more laborintensive assembl! stages of production are performed in developing countries. An increasingl! large share of cross-border investment in manufacturing fits into this categor!. accounting for #0 of the top #44 M&'s.. the human and ph!sical capital-intensive stages of production such as design and chip fabrication.0 indicates. +hird. are performed in the advanced industriali(ed countries.0). and transmissions is performed in developed countries. man! American M&'s made direct investments in the 8uropean . for e-ample. the capital-intensive design and production of individual parts such as bod! panels. hich account for seventeen of the largest #44 M&'s (see table 1.nited )tates in response to concerns that barriers to mar*et access ould limit the number of cars the! ould be allo ed to e-port into the American econom! from 9apanese and Berman plants. 0 . &issan. engines. and electrical eEuipment. <onda. In computers.nion to gain access to the common mar*et being created there.

+he earl! dominance of American firms has been increasingl! diminished as 8uropean and 9apanese firms began to engage in foreign direct investment. American M&'s engaged primaril! in mar*et. In short. ?oth of these characteristics of M&' activit! have changed dramaticall! since #$/4. 8uropean and 9apanese governments had little interest in encouraging out ard direct investment. and Australia for natural resource e-traction. It is common to divide this evolution into t o distinct periods. American firms dominated foreign direct investment. +he push to invest in 8urope as given additional impetus at the end of the #$14s b! the creation of the 8uropean 8conomic 'ommunit!. 'anada.and natural resource-oriented foreign direct investment dominated the immediate post ar period. the immediate post ar period spanning the !ears #$01 to #$/4 and a second period since #$/4. As a conseEuence. hile American firms continue to pla! a large role. +hus. American firms dominated M&' activit!. )econd. First. the bul* of M&' investment during this period as oriented to ard 8urope for the purpose of manufacturing. @ther direct investments flo ed to developing countries.Multinational corporations6 activities in the post ar international econom! have evolved over time. accounting for about t o-thirds of the ne affiliates created in this period. +he increased role of other industriali(ed nations has more recentl! been accompanied b! the emergence of foreign direct investment b! M&'s based in the Asian &I's and in Gatin America. 'oncerned ith post ar reconstruction and un illing to ris* the balance of pa!ments conseEuences of capital outflo s. the! are not nearl! as 1 . + o features characteri(ed the immediate post ar period. and thus the earl! #$/4s sa a rapid increase in the amount of mar*et-oriented investment b! American firms in the 'ommon Mar*et countries.

e-amining the nature of the bargaining relationship bet een M&'s and host-countr! governments and governments6 efforts. b! the reduction in trade barriers achieved through the BA++ process. &e investments are increasingl! underta*en as part of an integrated international production s!stem. +he central importance of M&'s in the contemporar! international econom! raises a large number of issues that e e-plore in the pages that follo . not as self-contained entities. As Dunning (#$$/) notes. . during the last fift! !ears multinational corporations have gro n to pla! a centrall! important role in the international econom!. In summar!. M&'s are.and natural resource-oriented direct investment has fallen and that of efficienc!-oriented investment has risen. in man! respects. to craft an international investment regime.dominant toda! as the! ere in the earl! post ar !ears.e then turn our attention to the political econom! of M&'s. e-amining h! firms engage in foreign direct investment and ho FDI affects economic activit! in the countries that host it. the relative importance of mar*et. / . freEuentl!. unsuccessful to date." +he shift to efficienc!oriented investments and integrated international production s!stems has been made possible in large part b! developments in communications technolog! and. their associated suppliers and industrial customers. M&'s increasingl! vie “each of their foreign affiliates and. as e sa in chapter four.hat are the economic and political conseEuences of M&' activit!5 +o ans er this Euestion e loo* first at the economics of multinational corporations. At the same time. Most of these issues can be subsumed under a single EuestionI . the driving force behind the deepening integration of the global econom!. but as part of a regional or global net or* of activities.

hile others argue that M&'s have a negative impact on host countries. Moreover. particularl! in the developing orld. and thus does not generate the *inds of boom and bust c!cles e sa in chapter 2. it is less obvious hat impact these investments have on the countries that receive them. therefore.hile it is clear that M&'s are motivated to engage in foreign direct investment to raise their profitabilit!. because M&'s create fi-ed investments. ?ecause developing countries usuall! have lo savings. FDI can usefull! add to the capital available for ph!sical investment. @f the man! possible a!s in hich savings can be transferred to the developing orld. most of the controvers! surrounding M&' activit! arises from disputes over ho foreign direct investment affects the host countr!. In addition. <ere e loo* closel! at t o elldeveloped perspectives on the impact of foreign direct investment on host countries and then briefl! consider hat the e-isting empirical evidence suggests about the accurac! of these competing perspectives. Fi-ed investment is substantiall! less volatile than financial capital flo s. C . because M&'s invest b! creating domestic affiliates. this form of cross-border capital flo is not subJect to the problems often posed b! financial capital flo s. Foreign direct investment is an important mechanism through hich savings are transferred from the advanced industriali(ed orld to the developing orld. )ome argue that FDI is highl! beneficial to the host countr!. In fact. direct investment does not raise host countries6 e-ternal indebtedness. +he benign model argues that M&'s ma*e a significant contribution to economic development. direct # # +hese terms are borro ed from Moran (#$$$).The Costs an# -enefits of MNC $cti/ity <o are host countries affected b! M&' activit!5 .

CC-2). +he benign model also suggests that M&'s are important vehicles for the transfer of technolog! to host countries. Breater e-perience at managing large firms allo s M&' personnel to organi(e production and coordinate the activities of multiple enterprises more efficientl! than host countr! managers. In addition to transferring technolog!. 8-ternalities arise hen economic actors in the host countr! that are not directl! involved in the M&'-local affiliate technolog! transfer also gain from this transaction. In Mala!sia. as able to use the technolog! it acEuired from Motorola to produce inputs for other Mala!sian firms at a lo er cost than these inputs ere available else here. +his *no ledge is applied to the host countr! affiliates. +echnolog! transfer can in turn generate significant positive e-ternalities ith ider implications for development (see Braham #$$/. If the Mala!sian Motorola affiliate. ?ecause M&'s control proprietar! assets. In the absence of the technolog! transfer. the benign model suggests that M&'s transfer managerial e-pertise to developing countries. then the technolog! transfer ould have a positive e-ternalit! on the Mala!sian econom!. Indigenous managers in these affiliates can then move to indigenous firms. the indigenous firm ould not have been able to produce these products.investment might be the most stable and least burdensome for the recipient countries. for e-ample. #3%#%4). Motorola Mala!sia transferred the technolog! reEuired to produce a particular t!pe of printed circuit board to a Mala!sian firm. for e-ample. spreading 2 . hich are often based on speciali(ed *no ledge. the investments the! ma*e in developing countries often lead to this *no ledge being transferred to indigenous firms. hich then developed the capacit! to produce these circuit boards on its o n (Moran #$$$. allo ing them to operate more efficientl! as ell.

ith negative conseEuences on individual savings. hile M&' profits. the malign model argues that M&'s reduce domestic savings. .hen direct investments are made as part of a global production strateg!. +he amount of domestic savings available to finance proJects therefore falls. rather than transferring savings to developing countries. it is suggested that M&'s earn rentsK above normal profitsKon their products and repatriate most of these earnings. are transferred bac* to the home countr!.managerial e-pertise into the host countr!. M&' investment therefore “cro ds out" rather than adding to domestic investment. )avings are reduced in t o a!s. )econd. but argues that these factors often operate to the detriment of host countr! economic development. +his opens up e-port opportunities that indigenous producers ould not other ise have. for e-ample. +hese opportunities ould not have arisen had the firm not been able to lin* up ith Motorola Mala!sia. +he Mala!sian firm to hich Motorola transferred the printed circuit board technolog!. but also began to suppl! these components to eleven Motorola plants orld ide. it is argued that M&'s often borro on the host countr! capital mar*et rather than bring capital from their home countr!. <ost countr! consumers therefore pa! too much for the goods the! bu!. +he malign model focuses on man! of the same elements as the benign model. ound up suppl!ing not onl! Motorola Mala!sia. the local affiliates of the M&' and the domestic firms that suppl! the M&' affiliate become integrated into a global mar*eting chain. +he malign model also argues that M&'s e-ert tight control over technolog! and $ . hich could potentiall! be a source of savings and investment in the host countr!. First. the benign model suggests that M&'s enable developing countr! producers to gain access to mar*eting net or*s. First. Finall!.

in large part because M&'s are reluctant to hire host-countr! residents into top-level managerial positions. domestic input producers in the same industr! ill find that as the domestic producers the! suppl! are driven out of business. one of the principal reasons for M&' investment arises from the desire to maintain control over proprietar! assets. the! have no one to sell their intermediate goods. Biven this. +hus. +hus.sing best practices for management and state of the art technolog!.hich of these t o models is correct5 +he short ans er is that both are7 foreign direct investment is sometimes beneficial for and at other times detrimental to the host countries. Managerial e-pertise is not readil! transferred either. . no # 4 . preventing the transfer of both. @n the one hand.managerial positions. )econd. thereb! driving them out of business. local input suppliers can also be driven out of business b! M&'s. Finall!. . As a result. the malign model suggests that M&'s can drive domestic producers out of business. domestic firms producing in the same sector ill face increased competition once an M&' begins selling in the domestic mar*et. As e sa above. M&'s can often under-price local firms. M&'s often desire to assemble their finished goods from imported components. +he benign and the malign models depict dramaticall! different conseEuences from M&' investment in developing countr! economies. +he logic here is simple. and then once having done so begin to transfer this technolog! to host-countr! firms. the second purported benefit of M&'Kthe transfer of technolog! and managerial e-pertiseK can be st!mied b! the ver! logic that causes M&'s to underta*e FDI. + o studies. +his can happen in one of t o a!s. it is indeed hard to understand h! an M&' ould ma*e a large fi-ed investment in order to retain control over proprietar! technolog!.

and in one-third of the cases the impact as negative. Foreign affiliates in the e-tractive industries often gain monopol! control over the resource deposits of a given countr!. one can suggest that some t!pes of investment begin ith a bias against host countr! development hile other t!pes of investment do not carr! an initial bias. +hus. are suggestive in this regard. .ells #$2/). hile affiliates producing for the host-countr! mar*et are often protected from e-ternal competition b! high tariffs. hile one-Euarter to one-half of the proJects imposed net costs onto the host countr! (8ncarnation and . including the specific agreement bet een the host-countr! government and the M&' upon hich the investment is based.hile an! broad generali(ations must therefore be treated ith considerable caution.countries (Gall and )treeten #$CC). foreign direct investment sometimes operates in the manner suggested b! the benign model. both t!pes of investment ta*e place under conditions of limited competition. @ne stud! e-amined 22 M&' affiliates operating in si. for e-ample. A similar stud! as conducted about ten !ears later. this stud! found that bet een half and three Euarters of the foreign investments !ielded net benefits to the host countries. +he absence of ## . . A range of considerations are important. Focusing on 14 foreign direct investments.hat determines hether an! particular investment ill be beneficial or detrimental to the host countr!5 It is e-tremel! difficult to sa! an!thing s!stematic or conclusive in response to this Euestion. First. Mar*et oriented and natural resource investments both carr! biases that can limit the contribution the! ma*e to economic development in host countries. and at other times it operates as the malign model suggests. +he authors found that in t o-thirds of the cases foreign direct investment had a positive impact on the host countr!.some hat dated.

efficienc!-oriented investments often “cro d-in" rather than “cro d out" investments b! domestic firms. +he research reported b! 8ncarnation and # 3 . For all of these reasons e might e-pect host countries to be most li*el! to suffer costs from natural resource and mar*et-oriented investments. . #C3). and the level of rents is correspondingl! lo er. ith associated efficienc! losses for the host countr!. Finall!. #C%). +he industries in hich these investments occur are usuall! Euite competitive internationall!. it has been estimated that Intel6s decision to construct a microprocessor plant in 'osta Dica ill li*el! give rise to additional investments b! 04 'osta Dican firms (. the international orientation of such firms creates opportunities for local firms to lin* themselves to global mar*eting net or*s. that recent investments b! M&'s in copper mining in 'hile ma! have substituted for investments that other ise ould have been made b! the 'hilean national copper compan! ('@D8G'@). for e-ample. )uch investments can (but don6t al a!s) create bac* ard lin*ages to domestic input producers. Finall!. For e-ample.&'+AD suggests. In particular. neither resource oriented nor mar*et oriented investment offers man! opportunities for domestic producers to lin* into international mar*eting net or*s.competition results in large rents accruing to firms operating in these areas. and thus can promote rather than retard local firm gro th. 8fficienc!-oriented investments seem to carr! fe er of the biases and offer the greatest chance that M&' activit! ill have a positive impact on host countries. “ hich is the largest copper mining enterprise in the orld and operates ith state-of-the-art technolog!" (. hence the M&'6s drive for cost reduction measures. both t!pes of investment can have a negative impact on domestic producers in the host countr!.&'+AD #$$$.&'+AD #$$$. Moreover.

In addition.. All of the e-port-oriented proJects in the sample of M&' affiliates that the! e-amined provided benefits to the host countr!. an e-port reEuirement as imposed7 )inger as reEuired to increase its e-ports from +ai an rapidl!. # % . +echnical assistance as also provided to local se ing machine 3 3 ?ased on . and ma*e available technical e-perts to assist in local firms6 efforts to produce the specified parts. )inger as obliged to allo +ai anese se ing machine producers to use the same parts it sourced from local parts producers at a cost close to the orld price for these parts.ells (#$2/) is consistent ith the notion that efficienc!-oriented investments contain fe er of the biases against development that are present in natural resource and mar*etoriented investments. )inger as reEuired to provide the local parts producers ith standardi(ed blueprints. )inger first began producing in +ai an in #$/0. +echnical and management e-perts ere dispatched to train local parts producers and to reorgani(e the production s!stem ithin +ai an. the +ai anese government imposed substantial conditions to ensure technolog! transfers. For all of these reasons e might e-pect host countries to benefit the most from efficienc!-oriented investments.&'+AD #$$$. At the time there ere a number of local se ing machine producers using old technolog! and lac*ing standardi(ation and therefore unable to compete in international mar*ets. the +ai anese government imposed domestic content reEuirements. Finall!. In addition. 3##. As a condition of )inger6s investment. )inger complied ith all of these reEuirements. +he case of )inger )e ing Machines e-perience in +ai an is suggestive of the potential benefits available through ell-managed foreign direct investment. insisting that )inger source 2% percent of its parts from +ai anese producers ithin one !ear.

M&' activit! has historicall! been subJect to political considerations. Moreover.producersKthe ver! firms that comprised )inger6s competitionKat no cost to these firms. In summar!. the impact of an! particular investment on an! particular host countr! is shaped b! the particular agreement bet een the firm and the # 0 . Mar*et oriented investments are li*el! to fall some here in bet een these t o t!pes. In addition. +ai anese se ing machine producers became more competitive internationall!. 2/ percent of )inger6s local production as e-ported. )inger held classes for local parts producers in the technical and managerial aspects of the business. and significant bac* ard lin*ages bet een the final se ing machine producers and the parts suppliers occurred. As local parts became standardi(ed and of greater Eualit!. As e ill see in the ne-t section. As a direct result of these measures. and at other times imposing costs. thereb! allo ing them to or* to common specifications and standards. and at other times is detrimental to such development. +ai anese se ing machine producers also became able to e-port to foreign mar*ets. sometimes offering benefits. ?! the late #$/4s )inger as sourcing all of the parts for its se ing machines produced in +ai an from +ai anese firms (e-cept the needles). It is important to re-emphasi(e the tentativeness of these broad generali(ations. As a conseEuence. hile efficienc! oriented investments are the most li*el! to offer substantial benefits to host countries. ?lueprints and part specifications ere provided to all local parts producers. substantial transfers of technolog! occurred. @ne might suggest that natural resource investments are the least li*el! to offer substantial benefits to host countries. M&' activit! is sometimes beneficial for host countr! economic development. Finall!.

Gectures on Direct Investment. Multinational 8nterprise and 8conomic Anal!sis. !eferences 'aves.I Institute for International 8conomics. #$C/. In other ords. 'ambridgeI MI+ . #$2C. edited b! . )i. “De-evaluating the ?enefits of Foreign Direct Investment.niversit! . .ress.host countr! government. =indleberger. +he international operations of national firmsI a stud! of direct foreign investment. &e <avenI Lale . (GondonI International +homson ?usiness ..ashington." International @rgani(ation 0# (autumn)I /4$-/%2. C%-#4#." in 'ompanies ithout ?ordersI +ransnational 'orporations in the #$$4s. D. 'ambridgeI 'ambridge .'. # 1 . +hese agreements can transform a natural resource investment into a highl! beneficial proposition for a host countr!. )tephen. #$$/. #$/$. 9ohn <.ress).ress. =obrin. and the! can transform an efficienc!-oriented investment into a highl! costl! one.niversit! . 'harles . Blobal 'orporations and &ational Bovernments. the effect that an! particular foreign direct investment ill have on an! particular host countr! ill depend greatl! on the specific details of the case. #$$/. <!mer. Braham. Dunning.ress. #$$/. 8d ard M. )tephen. hile the preceding discussion is suggestive.&'+AD. Dichard 8. “+esting the ?argaining <!pothesis in the Manufacturing )ector in Developing 'ountries. pp.

&e Lor*I Doutledge. 3444.nited &ations. pp. #$C0. “+he Bro ing Interdependence ?et een +ransnational 'orporations and Bovernments. &e Lor*I ?asic ?oo*s.&'+AD.nited &ations 'onference on +rade and Development. . #$$%. 9ohn Dunning. .olic! Agenda for Developing 'ountries and 8conomies in +ransition. 9ohn M. &. . #$$$. +heodore <.rinceton .nited &ations.. # / . +heodore <. edited b! . pp. Da!mond. BenevaI +he . Foreign Direct Investment and DevelopmentI +he &e . BenevaI +he . )overeignt! at ?a!I the Multinational )pread of . #$$1. #$$/. (GondonI International +homson ?usiness . ." in +he +heor! of +ransnational 'orporations. “+he Multinational 8nterpriseI Mar*et Failure and Mar*et . ." in 'ompanies ithout ?ordersI +ransnational 'orporations in the #$$4s. . 311-C$.orld Investment DeportI 'ross-border Mergers and AcEuisitions and Development.'. 8nterprises.ress). BenevaI +he .I Institute for International 8conomics. )topford.nited &ations. .ashington. #$$$.ress..Moran. .nited &ations 'onference on +rade and Development.9. >ernon. editor.orld Investment DeportI +ransnational 'orporations and 'ompetitiveness.nited &ations 'onference on +rade and Development.o er 'onsiderations.orld Investment DeportI Foreign Direct Investment and the 'hallenge of Development. #$C#. .niversit! . #/%-#23. Multinational corporations and the politics of dependenceI 'opper in 'hile. +eece. Moran.). D.rinceton. David 9.

# .

C .