Policy and Political Theory in Trade Practice: Multinational Corporations and Global Governments PDF
Preview Policy and Political Theory in Trade Practice: Multinational Corporations and Global Governments
Policy and Political Theory in Trade Practice DOI: 10.1057/9781137398369.0001 Other Palgrave Pivot titles Sirpa Salenius: Rose Elizabeth Cleveland: First Lady and Literary Scholar StenVikner and Eva Engels: Scandinavian Object Shift and Optimality Theory Chris Rumford: Cosmopolitan Borders Majid Yar: The Cultural Imaginary of the Internet: Virtual Utopias and Dystopias Vanita Sundaram: Preventing Youth Violence: Rethinking the Role of Gender and Schools Giampaolo Viglia: Pricing, Online Marketing Behavior, and Analytics Nicos Christodoulakis: Germany’s War Debt to Greece: A Burden Unsettled Volker H. Schmidt: Global Modernity. A Conceptual Sketch Mayesha Alam: Women and Transitional Justice: Progress and Persistent Challenges in Retributive and Restorative Processes Rosemary Gaby: Open-Air Shakespeare: Under Australian Skies Todd J. 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First published in 2014 by PALGRAVE MACMILLAN® in the United States—a division of St. Martin’s Press LLC, 175 Fifth Avenue, New York, NY 10010. Where this book is distributed in the UK, Europe and the rest of the world, this is by Palgrave Macmillan, a division of Macmillan Publishers Limited, registered in England, company number 785998, of Houndmills, Basingstoke, Hampshire RG21 6XS. Palgrave Macmillan is the global academic imprint of the above companies and has companies and representatives throughout the world. Palgrave® and Macmillan® are registered trademarks in the United States, the United Kingdom, Europe and other countries. ISBN: 978–1–137–39836–9 PDF ISBN: 978-1-349-48658-8 Library of Congress Cataloging-in-Publication Data is available from the Library of Congress. A catalogue record of the book is available from the British Library. First edition: 2014 www.palgrave.com/pivot doi: 10.1057/9781137398369 Contents List of Illustrations vi Globalization Yesterday and Today: Changes Matter Theoretical Gaps: How Existing Theories Fall Short When Assumptions Change How Multinational Corporations Affect Economic Growth Today: A Legacy of Research and Theoretical Reasoning in Turbulent Times Methodological Exercise Purchasing Innovation Globally: Mergers and Acquisitions in Knowledge Sourcing The Trade Policy Process in the United States: Reversing a Legacy of Liberalization? “Double” Competition for FDI in the United States: Is It Worth It? Policy Implications References Index DOI: 10.1057/9781137398369.0001 v List of Illustrations Tables 4.1 Cross-sectional time-series regression analysis, GDP OER 49 4.2 Cross-sectional time-series regression analysis, GDP PPP 50 5.1 OLS regression, 2008 on PPP GDP 67 5.2 Cross-sectional time-series regression analysis, 1999–2009, PPP GDP 69 7.1 Cross-sectional time-series regression analysis, state GDP 103 7.2 Cross-sectional time-series regression analysis, FDI stock 105 7.3 Cross-sectional time-series regression analysis, unemployment 107 Figure 4.1 Change in US exports in 2000–2006 for top export markets 52 vi DOI: 10.1057/9781137398369.0002 1 Globalization Yesterday and Today: Changes Matter Abstract: Globalization’s impact on changing firm and market characteristics is discussed. The focus is on growth and proliferation of MNCs and their FDI. The chapter defines what an MNC is, what it does, how it is created today, where, and how it operates. The chapter outlines the differences between modern day global enterprises and the MNCs of the recent past. Anguelov, Nikolay. Policy and Political Theory in Trade Practice: Multinational Corporations and Global Governments. New York: Palgrave Macmillan, 2014. doi: 10.1057/9781137398369.0003. DOI: 10.1057/9781137398369.0003 Policy and Political Theory in Trade Practice Few would argue that globalization defines economic activity today. Globalization has emerged as a comprehensive term describing the process of international market integration and consumer preference convergence (Townsend, Yeniyert, & Talay, 2009). Those two factors vary in degree and magnitude across countries. The general trend of convergence is accompanied by a process of location specific strate- gies that firms employ to maximize global customer satisfaction. The success of that process is dependent on market access. Therefore, the creation of market integration policies has magnified and continues to develop, driven by the economic interests of firms. As their assets continue to internationalize, firms continue to push for the disman- tling of political barriers to trade. The increased lessening of political barriers to international trade has been greatly aided by the techno- logical advances that have lowered the costs of transportation and communication globally. These factors have shaped the expansion of the geographic scope of markets (Adams, G., 2008; Ward, Bhattarai, & Huang, 1999). As market expansion has magnified, firms have transformed from national to multinational to transnational. The difference between multinational and transnational firms is in the concept of “born-global” (Cavusgil & Knight, 2009; Knight & Cavusgil, 1996, 2004). Born-global is the platform of new firm formation today. From their onset, modern new enterprises are not bound by national boundaries but are rather the creation of fluid international partnerships with multiple investors, stake holders, and supply chains. A multinational corporation has traditionally been viewed as the natural progression of a national corporation that has internationalized sufficiently and gone global (Johanson & Vahlne, 1977). This process was achieved through many means—from building subsidiaries overseas to the extent that business operations from them become just as, if not more, valuable than home-country operations, to acquiring foreign corpora- tions through strategic merger and acquisitions (M&As). Born-global firms on the other hand are created international from the start. Even though headquartered in a particular country, their assets, commercial activities, and ownership are significantly internationalized. In that fact, born-global firms have a nationality but not a defined national owner- ship. In addition, many such firms seldom own any factors of produc- tion, such as factories or research and development facilities, but rely heavily on subcontracting from independent suppliers. DOI: 10.1057/9781137398369.0003 Globalization Yesterday and Today Characterized by high knowledge-intensive components and a great degree of added value from specialized services such as design and marketing, born-global firms produce fast moving consumer goods (FMCGs) or consumer services. Examples are consumer products, electronics, home products, clothes, foot and outerware, cosmetics and fragrances, prepared foods and supplements, as well as telecommunica- tions service platforms and cloud computing. The born-global concept describes such conglomerates as Liz Claiborne, Nike, electronics giant Logitech, and the all-indispensable Skype. With the intensification of globalization and the increasing diversifi- cation of corporate holdings the term that has emerged to best describe this pervasive internationalization of assets and operations to include the subtle, if not contentious, difference between “multinational” and “tran- snational” is global enterprise. Global enterprise denotes that even if a firm started as national and has grown to multinational, it is no differ- ent in its global market reach and positioning than a born-global firm. Still, the preferred common name of global enterprise is a multinational corporation. The general public understands the concept through that name and there is also a legacy component for its endurance. Much of the policy discussion and academic literature of the past three decades for and against globalization has centered on the dealings of MNCs or MNEs—multinational enterprises. An MNC can be viewed as a network of activities located in different countries (Kogut & Kulatilaka, 1994). Those activities include all aspects of production. Today they range from research and design to prototyp- ing to partial assembly to finishing, packaging, warehousing, distribu- tion, and customer service. MNCs not only sell in foreign markets but many also control foreign firms. For example, American General Motors (GM) owns 50.9% of GM Daewoo in Korea; German Daimler owns 85% of Mitsubishi Fuso in Japan, and French Renault owns 70.1% of Renault Samsung in Korea. Renault also owns 44.4% of Nissan in Japan and Renault’s CEO serves as Nissan’s CEO (Ishikawa, Sugita, & Zhao, 2008). Such interconnectedness blurs national economic interests and chal- lenges conventional economic classifications of imports, foreign assets, and exports. Firms can simultaneously export to a market and export from it. For example, GM is the 100% shareholder of Opel in Germany and Saab in Sweden, as well as a partial shareholder of Daewoo in Korea and Suzuki in Japan. GM exports its Opels from Germany mostly to the rest of continental Europe and parts of Asia, Saabs from Sweden mostly DOI: 10.1057/9781137398369.0003
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