Transnational Corporations(1), a refereed journal published three times a year by UNCTAD, provides insights on the economic, legal, social and cultural impacts of transnational corporations (TNCs) in an increasingly global economy and on the policy implications that arise therefrom. The latest issue, volume V, number 2, contains the following articles.
Government policy responses to strategic, rent-seeking transnational corporations
by Peter J. Buckley, Director, Centre for International Business, School of Business and Economic Studies, University of Leeds, United Kingdom (T: +44-113-233 4646; F: +44-233-4465)
This article examines government policies towards the foreign market-servicing strategies of TNCs, namely, exporting, foreign licensing and foreign direct investment (FDI) in a world of imperfect markets and imperfect information. Noting that TNCs can switch from one market-servicing strategy to another, the effectiveness of government policy is assessed.
The eclectic paradigm: the next generation
by H. Peter Gray, Professor Emeritus of Economics and Management and Adjunct Professor of International Business, Rutgers University, New Jersey, United States (T: +908-874-4811; F: +201-648-1323)
The article develops the "eclectic paradigm" by John H. Dunning -- a paradigm that is commonly used to analyse the determinants of FDI -- to allow for the globalization of production and markets for major products. The new dynamic framework focuses on maintaining the competitiveness of a TNC and emphasizes the importance of managerial efficiency, as well as the possession of an integrated portfolio of international assets by the firm. A TNC´s competitive advantage can then be analysed in the context of global oligopolistic markets in which these firms operate.
Multilateral investment agreements and regional economic integration
by Joachim Karl, Bundesministerium fuer Wirtschaft, Bonn, Germany (T: +49-2-28-615-4347; F: +49-2-28-615-3541)
The issue of a multilateral approach towards an investment agreement raises the question of whether -- like in trade -- a regional economic integration organisation like the European Union needs a special clause to allow it to advance with its internal investment liberalization without being obliged to extend the benefits arising therefrom to non-member countries. Although from an economic viewpoint any discrimination against non-European Union investors could hardly be justified, based on European Union law there may be grounds that make such differential treatment necessary. European Union legislation on the establishment of foreign companies goes beyond the traditional international law rule of non-discrimination by obliging member states to abolish any unjustifiable obstacles to FDI. Furthermore, the concepts of precedence and direct applicability of European Union law have no parallel in international law.
The determinants of foreign direct investment in developing countries
by Kwang W. Jun, Senior Financial Economist, International Economics Department, The World Bank, Washington, D.C., United States (T: +202-473-6728; F: +202-522-3277) and Harinder Singh, Chairperson, Economics Department, Grand Valley State University, Allendale, Michigan, United States
Various determinants of FDI flows to developing countries are analysed, emphasizing especially qualitative factors such as political risk and business conditions. The findings indicate that a qualitative index of political risk and a general qualitative index of business operating conditions are significant determinants of FDI flows for countries that have attracted historically sizable investment flows. For these countries, there is also a positive relationship between trade barriers and FDI flows, supporting the hypothesis that one motive for investing abroad is to avoid a country´s tariffs. For countries that have not succeeded in attracting large FDI flows, socio-political instability (measured by work hours lost in industrial disputes) was found to have a negative impact on FDI flows. A general conclusion is that a country´s outward export orientation provides the strongest explanation of its ability to attract FDI.
Estimating economic activities by Japanese transnational corporations: how to make sense of the data? (Research note)
by Eric D. Ramstetter, Professor, Faculty of Economics, Kansai University, Osaka, Japan (T: +81-6-368-0631; F: +81-6-339-7704)
This research note compares several indicators of the performance of Japanese transnational corporations as estimated by Japan´s Ministry of Finance, the Bank of Japan, Japan´s Ministry of International Trade and Industry with estimates compiled by a private publishing company, Toyo Keizai, and by the United States Department of Commerce. The Ministry of Finance data on approved-reported flows and stocks of foreign direct investment are used frequently, but they substantially overestimate the stock of Japanese investment, especially before the mid-1980s and in the developing economies. The surveys by the Ministry of International Trade and Industry are potentially the most useful set of data because they contain a large number of variables measuring firm performance. However, they are plagued with low coverage rates that vary across time and across variables. Developing and implementing a methodology for estimating the marginal effects of changing coverage rates on the estimates of employment, sales, value-added to sales and export to sales ratios is the major objective of this note.