Search Results

This chapter argues that any incorporation of the CEE economies into the VoC framework must take into account two fundamental features of these economic systems: an almost complete lack of working-class political mobilization and a completely outdated technological structure. As a result, there is great reliance on foreign investors and foreign purchasers for providing technology transfer and the training of manpower. The chapter conceptualizes this VoC as ‘liberal dependent post-communist capitalism’ to highlight the liberal nature of the state and the dependent nature of the economy. In most the rest of the post-communist world, foreign direct investment, or FDI, and foreign manufacturers play a much smaller role. Instead, patron-client relationships ensnare major enterprises, leading to a decomposition of the bureaucratic (in the Weberian sense of the term) nature of the state. This produces a different variety of post-communist capitalism.

The emergence of the Irish ICT-cluster is claimed to be driven by the presence of foreign anchor firms, for example Intel. These firms also acted as incubators for domestic entrepreneurs. Half of the Irish manufacturing labour force is now employed in foreign-owned firms, with the bulk in ICT. The ICT cluster (both hardware and software) is agglomerated around Dublin. Already in the mid-1990s Ireland had become host to the most important ICT-cluster in Europe. Equally transformative was institutional reform and fiscal policy that also paved the way for future tax reductions, a newly developed ‘social partnership model’ of wage determination and Ireland's EU-membership in 1973 which guaranteed access to the European markets.

This chapter provides an investigation of the following questions: why power passed from producers to retailers; how retailers utilize their dominance in the chain; and whether this imbalance of power may be found in all western clothing industries. To answer these questions, the chapter covers the following aspects of the German, UK, and US clothing retail sectors: their historical development and current structure, with a focus on the evolution of different retail channels; intensified competition and firms' responses of concentration and corporatization; the move to ‘private label’/store brands and the development of direct sourcing, i.e., sourcing without using domestic middleman firms; the strategy of increased market segmentation and the differing market positions, in interaction with consumption styles, adopted in each country; the development of ‘fast fashion’ and ‘just-in-time’ sourcing; and the internationalization of sales through foreign direct investment. The final section emphasises both the enduring divergences between national retail sectors and the differential degree of power retailers hold vis-à-vis domestic ‘manufacturers’ in each country but also points to some convergence tendencies.

Only the most rabid opponents deny the potential for MNCs and FDI to provide significant benefits for large numbers of people and countries. This chapter is the equivalent of a law brief, one-sidedly expounding on the merits of one side of a case being litigated. As such, it deliberately drops the emphasis in previous chapters on the need for a balanced, objective approach to a subject dominated by heterogeneity, complexity, and subjectivity. The virtues of MNCs and FDI are discussed in terms of their demonstrable contributions to the overall economic growth and prosperity of most host countries as well as their emphasis on efficiency and product innovation. More specific contributions such as creation of relatively well-paying jobs, enhancement of workers' skills, transfer of new technology, and generation of both tax revenue and hard currency earnings through increased exports, are also discussed.

One of the most sensitive issues regarding FDI and MNCs is their impact on relatively less developed countries (LDCs). This chapter makes no effort to “prove” net harm or benefits to LDCs. Instead, the thesis developed here is that it is impossible to determine scientifically that all MNCs are collectively harmful or beneficial to all LDCs on a permanent basis. To demonstrate the critical importance of heterogeneity, complexity, perceptions, and the fallacy of generalization, the nature of the conceptual obstacles to a definitive black-or-white judgment is examined. An examination of the many plausible arguments that incoming FDI is harmful on balance to the economic development of LDCs is followed by an examination of the many plausible arguments on behalf of the opposite conclusion, namely that on balance FDI has had a positive impact. A fourth section focuses on the difficulty in determining whether pre-existing economic conditions in a developing country determine the effects of incoming FDI, or whether FDI itself determines economic progress. The final section makes the case that the preferred answer to the question of the impact of MNCs and FDI on economic development is that it is indeterminate.

This chapter estimates the overall net foreign savings and resources brought into the country, and their contribution to domestic saving beyond meeting consumption needs and providing foreign exchange. This is followed by a more focused study of foreign direct investment as a source of increasing investment in the country. Following a review of the government FDI policies and its development in stages, the characteristics of FDI, the scale, and the extent of joint ownership with local investors are investigated. This is supplemented with an assessment of its economic impact on domestic investment, employment, economic growth, economic stability, balance of payments, and its contribution to the technological advancement of the country's manufacturing firms. The chapter also evaluates the effectiveness of the government's past FDI policies and presents a brief survey of the challenges facing South Korea's future FDI policy.

This chapter examines the impact of foreign institutional investors on various aspects of corporate governance and corporate restructuring. Alongside foreign direct investment (FDI) by foreign corporations, portfolio ownership by American and British mutual funds and pension funds has increased. Detailed interviews show how these foreign investors exert influence through the threat of exit and the cultivation of voice, thus exerting pressure for firms to improve corporate disclosure and engage with shareholders. A further analysis of the Japan Corporate Governance Index for 2003 for TSE 1st Section firms shows that firms with higher levels of foreign ownership are more likely to adopt Anglo-American style corporate governance reforms, such as equity-based performance measures, changes in the structure and function of the board, and communication with shareholders. Moreover, foreign ownership is also strongly linked to the likelihood of corporate downsizing in terms of employment or divestment.

This chapter conducts an empirical assessment of the impact of BITs on FDI stocks. It estimates several variants of the knowledge-capital model of multinational enterprises (MNEs) using the largest available panel of outward FDI stocks provided by the Organization for Economic Cooperation and Development (OECD), which contains FDI of OECD countries into both OECD and non-OECD economies. It shows significant and positive impact of ratified BITs throughout. The estimated effect of BITs on real outward FDI stocks amounts to about 30% in the preferred specification. The chapter also looks at whether simply signing a BIT will have a positive anticipation effect. It finds a positive impact from signing a treaty, although its magnitude is smaller than that associated with the ratification of an existing treaty. However, the estimated anticipation effect is insignificant, in most specifications, leading the conclusion that the advantages to simply signing a BIT are inconsequential.

This chapter examines the political economy of selected individual reform measures to provide a flavour of the interplay of specific domestic and international economic interest groups in influencing their time path of reforms. Two procedural and two institutional reforms are selected to bring out the strengths and limitations of coalition politics: liberalization of domestic and international private investment, liberalization of international trade in goods and services, privatization of government-owned commercial enterprises, and organized labour market reforms. The chapter analyses how the central government has been in the driver’s seat in steering the overall pace and direction of reforms.

Examines the determinants of union influence over wages. After a brief review of the existing literature on union wage effects, it describes the major factors conditioning the extent to which unions will be able to exert an influence on bargained wage outcomes. The likely impact of trade, economic integration, and FDI on union bargaining power are analysed in the following section.

A senior British civil servant working on economic issues declared in late 1930 (as the Great Depression ground on), “If I leave the office on Saturday feeling confident that in the past week I have done no harm, then I am well content.” The descendants of this breed of “do no harm” civil servants and its neoclassical economist counterpart forged the Washington Consensus world view about appropriate development policy in the 1980s, which has dominated “global policy” on development ever since. In post-war East Asia, however, civil servants and economists espoused a more activist role of the state, as in the slogan displayed in the entrance to the Industrial Development Bureau in Taipei (Republic of China): “The most important thing in life is to have a goal, and the determination to achieve it.” This essay examines the economic arguments against and for a more activist role of the state in giving directional thrust to the economy, and presents some considerations to guide the institutionalization of such a role.

This chapter examines the effect of bilateral investment treaties (BITs) on inward foreign direct investment flows (FDI) into least developed countries (LDCs). It suggests that BITs should not only boost FDI between the signatory states but more broadly increase inward FDI into the developing country signatory. The chapter begins with a discussion of the often narrow, legalistic conceptualization of BITs in previous studies, as well as previous dyadic and monadic empirical findings. It presents a statistical analysis of inward FDI flows into 122 developing countries with a population of more than 1 million from 1970 to 2000, and a qualitative analysis of the hypothesized causal mechanisms. It shows that the positive correlation between BITs and subsequent FDI is driven by the hypothesized causal mechanisms.

This chapter addresses the question of whether of bilateral investment treaties (BITs) increase foreign direct investment (FDI) to developing countries. Developing countries that sign more BITs with developed countries receive more FDI inflows. The effect is robust to various sample sizes, model specifications, and whether or not FDI flows are normalized by the total flow of FDI going to developing countries. There is some limited evidence that BITs function as substitutes for institutional quality. The message to developing countries, therefore, is that succumbing to the obligations of BITs does have the desired payoff of higher FDI inflows.

This chapter attempts to identify the determinants of foreign direct investment (FDI) into Latin American Countries (LAC) and the Caribbean (LAC) during the period from 1980 to 2003. Although a number of countries are aggressively pursuing investment agreements with the United States in order to increase investment, there is no evidence that signing such an agreement with the United States will bring increased investment. This is largely consistent with previous work on the relationship between BITs and investment. The analysis is also consistent with broader literature on FDI determinants in Latin America and the Caribbean, which shows that the size of the domestic economy and the ability to serve as an export platform are key drivers of FDI inflows.

This chapter examines whether the conclusion of BITs does indeed contribute to an increase in FDI. Time-series data analysis based on bilateral FDI flows between the BIT signatory countries shows that the influence of BITs on FDI is weak, especially in redirecting the share of FDI flowing from or to BIT signatory countries. In other words, following the signing of a BIT, it is more likely than not that the host country will marginally increase its share in the outward FDI of the home country; the same applies to the share of the home country in the FDI inflows of the host country. The effect, however, is usually small. In the cross-country comparison of FDI determinants, the overall conclusion is that BITs appear to play a minor and secondary role in influencing FDI flows.

Eric Neumayer and Laura Spess (2005) recently published in the journal World Development the first peer-reviewed, methodologically sophisticated econometric analysis of the effects that bilateral investment treaties (BITs) might have on foreign direct investment (FDI) inflows. The authors provided robust statistical evidence that developing countries that sign BITs with important capital-exporting countries enjoy potentially massive increases in FDI. This chapter replicates, expands, and critiques Neumayer and Spess's study with the purpose of probing how much is known about the effects of BITs on FDI inflows.

This chapter examines whether participation in bilateral investment treaties (BITs) leads to increased foreign direct investment (FDI) inflows from the treaty partner countries. The chapter is organized as follows. It begins in Section A with a short overview of the basic theory and case evidence on the potential of BITs to function as a commitment device for the host. Section B presents a theoretical model of BIT function and the decision of a host country to participate in one. Section C introduces and motivates an empirical approach to the endogeneity of BIT participation, and shows that selection bias is not a concern in the specifications. Section D presents the results of the regression analysis, followed by the graphical event study of BIT participation. The final subsection of results shows that BITs do not attract investment from nonpartner countries through signaling.

This chapter provides some evidence on the effect of bilateral tax treaties on foreign direct investment (FDI) activity. Using Organization for Economic Cooperation and Development's (OECD) data, it shows that new treaty activity (during the 1983–1992 period) suggests strong negative impacts on FDI. Despite the positive correlation in the case of much older treaties, this evidence cannot be weighed heavily since FDI activity before these treaties were in place cannot be observed. The results are consistent with previous work by Blonigen and Davies (2001) using only U.S. data. Thus, in conjunction with this earlier work, the results cast doubt upon the FDI promotion rationale for treaty formation, which stands in contrast to the conventional wisdom among many economists and lawyers.

This chapter sheds further light on the question of how tax treaties affect outward foreign direct investment (FDI). The chapter is organized as follows. Section A outlines the general equilibrium model of trade and multinational firms for studying the welfare and FDI effects of tax treaties. The theoretical hypotheses are summarized in Section B. Section C presents the database, the econometric methods, and the empirical results. Section D discusses the results in the light of previous research, and provides an extension regarding the time pattern of accumulation of the treaty-induced effect on FDI.