The Globalization of Multinational Enterprise Activity and Economic Development

Transcription

1 The Globalization of Multinational Enterprise Activity and Economic Development Edited by Neil Hood and Stephen Young Palgarve macmillan

2 First published in Great Britain 2000 by MACMILLAN PRESS LTD Houndmills. Basingstoke. Hampshire RG21 6XS and London Companies and representatives throughout the world A catalogue record for this book is available from the British Library. ISBN ISBN (ebook) DOI / First published in the United States of America 2000 by ST. MARTIN'S PRESS, INC., Scholarly and Reference Division. 175 Fifth Avenue. New York. N.Y ISBN Library of Congress Cataloging-in-Publication Data The globalization of multinational enterprise activity and economic development 1 edited by Neil Hood and Stephen Young. p. em. "This book is based on a workshop which was held at the Strathclyde Graduate Business School in the University of Strathclyde. Glasgow. UK. on 15 and 16 May, 1998"-Pref. Includes bibliographical references and index. ISBN (cloth) 1. International business enterprises Congresses. 2. International trade Congresses. 3. Economic development Congresses. I. Hood, Neil. II. Young, Stephen, HD G '.049-dc CIP Selection, editorial matter and Chapters I and 16 Neil Hood and Stephen Young 2000 Individual chapters (in order) John H. Dunning; Julian Birkinshaw; Neil Hood and Ewen Peters; Stephen Young, Jonathan Slow and Neil Hood; Stephen J. Kobrin; Peter 1. Buckley and Stephen Young; Daniel Chudnovsky; Hafiz Mirza; Terutomo Ozawa; Thomas L. Brewer and Stephen Young; Lynn K. Mytelka; Michael J. Enright; Ewen Peters; Nick Phelps; Kevin Morgan and Crispian Fuller 2000 Softcover reprint of the hardcover 1 st edition All rights reserved. No reproduction. copy or transmission of this publication may be made without wrinen permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency. 90 Tottenham Court Road, London WI P OLP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The authors have asserted their rights to be identified as the authors of this work in accordance with the Copyright. Designs and Patents Act This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources

3 Contents List of Tables List of Figures List of Boxes Preface and Acknowledgements List of Contributors and Discussants x xu X1l1 XIV XV PART I ISSUES AND THEORY 1 Globalization, Multinational Enterprises and Economic Development Neil Hood and Stephen Young Introduction Globalization: Companies and Countries Globalization and Regional Futures Outline of the Book Concluding Remarks 2 Globalization and the Theory of MNE Activity John H. Dunning Introduction The Three Landmarks in Theorizing about MNE Activity Some Implications of the Revised Paradigm of International Production Conclusions PART II THE CORPORATE PERSPECTIVE 3 Multinational Corporate Strategy and Organization: An Internal Market Perspective 55 Julian Birkinshaw Introduction 55 Context 55 Issues Facing Large Multinational Corporations 57 Elements of anew Model 60 V

4 VI Contents The Internal Market Model 67 Discussion and Conclusions 74 4 Globalization, Corporate Strategies and Business Services 80 Neil Hood and Ewen Peters Introduction 80 The Globalization of Service Industries 81 Conceptual Considerations 83 Case Examples 91 Conclusions and Policy Implications 99 5 Globalization and the Growth of Small and Nondominant Firms: Case Evidence from Scotland 106 Stephen Young, Jonathan Slow and Neil Hood Introduction 106 Issues from the Literature 107 Case Illustrations 111 Discussion of Cases 122 Issues for Economic Development and Public Policy 126 PART III THE COUNTRY PERSPECTIVE 6 Development after Industrialization: Poor Countries in an Electronically Integrated Global Economy 133 Stephen J Kobrin Introduction 133 Globalization or Global Baloney? 135 Development and Globalization 137 The Indian Software Industry 140 Development in the Postindustrial Age Egypt at a Crossroads: MNEs and Economic Development in a Global Environment 155 Peter J Buckley and Stephen Young Introduction 155 Egypt's Foreign Direct Investment Postion 157 Analysing Egypt's Attractiveness for FDI 159 Policy Analysis and Recommendations 168 Conclusions 177

5 Contents Vll 8 MNEs, Globalization and Economic Development: The Case of Argentina in the 1990s 180 Daniel Chudnovsky Introduction 180 Destination, Origin, Characteristics and Motivation 184 International Trade by Foreign Firms 191 Technological and Organizational Contributions 193 Concluding Remarks The Globalization of Business and East Asian Developing-Country Multinationals 202 Hafiz Mirza Introduction 202 From Global Crisis to Globalization: A Walk through History 202 The Scale and Scope of Developing Country Multinationals 211 Ripples and Repercussions: The Characteristics of East Asian MNEs and the Pattern of FDI 213 Concluding Remarks Small- and Medium-sized MNCs, Industrial Clusters and Globalization: The Japanese Experience 225 Terutomo Ozawa Introduction 225 Theoretical Considerations 226 Structural Transformation, Globalization and SMEs in Japan 229 Overall Assessment 245 PART IV THE POLICY PERSPECTIVE 11 The World Trade Organization: Global Rule-maker? 251 Thomas L. Brewer and Stephen Young Introduction 251 The Architecture of Rules on Investment 253 Dispute Settlement Process and Cases 256 The Negotiating Agenda 264 Conclusions 267 Appendix: WTO Dispute Settlement Cases, 1 Jan Dec

6 Vlll Contents 12 Locational Tournaments for FDI: Inward Investment into Europe in a Global World 278 Lynn K. Mytelka Introduction 278 Turbulent Learning Environments 279 Locational Tournaments in the Automobile and Electronics Industries 285 Conclusions The Globalization of Competition and the Localization of Competitive Advantage: Policies towards Regional Clustering 303 Michael J Enright Introduction 303 Cluster-based Development Policies in the Global- Local Nexus 308 Sharpening Cluster Analysis and Cluster-Development Strategies 316 Conclusions Plant Subsidiary Upgrading: Some Evidence from the Electronics Industry 332 Ewen Peters Introduction 332 The Study and Findings 337 Conclusions 349 Appendix: Company Cases Regions, Governance and FDI: The Case of Wales 366 Nick Phelps, Kevin Morgan and Crispian Fuller Introduction 366 Regions, Governance and FDI 368 Governance and FDI in Wales 371 Governance, strategy and FDI in Wales: problematizing the role of the Assembly 379 Conclusion 384 PART V CONCLUSIONS 16 Globalization and Economic Development: Overview and Conclusions 393 Stephen Young and Neil Hood Globalization 393

7 Index Contents Global Firms and Global Strategies Economic Development Issues Economic Policy Final Note IX

8 List of Tables 1.1 Globalization: companies and countries Globalization and regional futures The changing characteristics of paradigms and theories: some stylized facts Types of internal markets and their characteristics A perspective on globalization World foreign direct investment inflows in Egypt and other developing economies, Opportunities for FDI in Egypt Policy reform for FDI attraction in Egypt Functions of foreign direct investment agency in Egypt FDI inflows to Argentina FDI outward stock by country, The ten largest sources of FDI in the developing world, The location of the world's 500 largest firms (by market capitalization), Analytical summary of EA-DCMs and FDI characteristics by source country Structural upgrading, industrial clusters and SME globalization Number of GATT and WTO dispute cases by time periods Country groups in GATT and WTO dispute settlement cases WTO members as respondents or complainants in dispute cases ( ) WTO disputes, directly involving investment issues ( ) The share of inward and outward foreign direct investment in gross fixed capital formation in the EU, North America and Japan Linkages: gross domestic expenditure on R&D in higher education financed by business The dimensions of regional clusters Nature and size of subsidiary plant upgrading 339 x

9 List of Tables Xl 14.2 Contest ability and public sector support for plant upgrading Key features of Porter's industrial clusters Examples of main cluster effects associated with subsidiary plant development 350

10 List of Figures 3.1 A model of the MNC subsidiary Trends in the provision of services to large corporations Service types, customer proximity and service nodes A stylized geography of the trends in proximity of the provision of business services Business services and sub-regional economic development: vicious and virtuous circles Call centres: potential development trajectories Indicators of globalization Globalization of case companies Incipient globalization circa From offshore production to global production: a schematic depiction of the evolution of international production by USA MNEs Globalization and East Asian 'regionalization' circa SMEs' overseas FDI and its proportion to total FDI, Innovation: number of resident patent applications, The basis of competitive advantage - country positioning Consumer electronics example Percentage share of new jobs associated with inward investment Old and new WDA/DBRW areas, and LA areas voting for Assemby 377 xu

11 List of Boxes 4.1 EDS FedEx Andersen Consulting 'Assynt Group' - mechanical engineering products and services 'Hope Group' - energy and oil engineering services 'Teallach Group' - banking and financial services 'Wyvis pic' - biotechnology 'Conival Ltd' - electronic instrumentation Glaxo Egypt S.A.E Accor Hotels S.A.E The Ezz Group RP. Scherer Egypt Swany and comparative advantage recycling Kankyo and OEM operations Summary features of Uruguay Round agreements relevant to FDI-related issues 'LapCo' - computers and components 'DeskCo' - computers and components 'SemCo' - computers and components 'TestCo' - communications equipment 'TelCo' - communications equipment 'TevCo' - consumer electronics 'ConCo' - consumer electronics 'AudioCo' - consumer electronics 362 Xlll

12 Preface and Acknowledgements This book is based on a Workshop which was held at the Strathclyde Graduate Business School in the University of Strathclyde, Glasgow, UK, on 15 and 16 May 1998, on the topic of the Globalization of Multinational Enterprise Activity and Economic Development. Through the generosity of a number of sponsors, several of whom have supported our work over a number of years, we were able to invite a distinguished list of authors and discussants to Scotland for this event. For their generous financial contributions we would therefore like to thank Scottish Enterprise, the country's leading economic development agency, Bank of Scotland, Royal Bank of Scotland, Barclay's Bank, Ernst & Young and the Souter Foundation. We would like to specially thank Irene Hood for making all the arrangements associated with the Workshop and for the superb contribution to its smooth running. We are also indebted to several of our PhD students in Strathclyde International Business Unit who ably assisted during the Workshop. In this regard, therefore, our thanks go to Karl Alorbi, Jurgen Broch, Jaswinder Hayer, Kevin Ibeh, Jeff Johnson and Prathap Oburai. The production of this volume would not have been possible without the excellent work of Irene Hood as our editorial assistant and we acknowledge her continued outstanding endeavours for us, her diligent coordination of the manuscripts and extensive liaison with all the contributors. NEIL HOOD STEPHEN YOUNG XIV

13 List of Contributors and Discussants CONTRIBUTORS Julian Birkinshaw, Stockholm School of Economics, Stockholm, Sweden. Thomas L. Brewer, Georgetown University, Washington DC, USA. Peter J. Buckley, University of Leeds, Leeds, UK. Daniel Chudnovsky, CENIT, Buenos Aires, Argentina. John H. Dunning, Rutgers University, New Jersey, USA. Michael J. Enright, University of Hong Kong, HongKong. Crispian Fuller, University of Wales, Cardiff, UK. Neil Hood, University of Strathclyde, Glasgow, UK. Stephen J. Kobrin, University of Pennsylvania, Philadelphia, USA. Hafiz Mirza, University of Bradford, Bradford, UK. Kevin Morgan, University of Wales, Cardiff, UK. Lynn K. Mytelka, UNCTAD, Geneva, Switzerland. Terutomo Ozawa, Colorado State University, USA. Ewen Peter, Scottish Enterprise, Glasgow, UK. Nick Phelps, University of Wales, Cardiff, UK. Jonathan Slow, Scottish Enterprise, Glasgow, UK. Stephen Young, University of Strathclyde, Glasgow, UK. xv

14 XVI DISCUSSANTS List of Contributors and Discussants Ash Amin, University of Durham, Durham, UK. Julian Birkinshaw, Stockholm School of Economics, Stockholm, Sweden. Peter J. Buckley, University of Leeds, Leeds, UK. John H. Dunning, Rutgers University, New Jersey, USA. Michael J. Enright, University of Hong Kong, Hong Kong. Neil Hood, University of Strathclyde, Glasgow, UK. Neil Kay, University of Strathclyde, Glasgow, UK. Stephen J. Kobrin, University of Pennsylvania, Pennsylvania, USA. Michael McDermott, University of Strathclyde, Glasgow, UK. Lynn K. Mytelka, UNCTAD, Geneva, Switzerland. A. Edward Safarian, University of Toronto, Ontario, Canada. James H. Taggart, University of Strathclyde, Glasgow, UK.