Transnational Corporations - Volume 29, Issue 1, 2022

Economic agglomeration and industrial clusters have always been part of industrialization and economic development. Since the 1960s, industrial hubs have proliferated in Asia, driven by policies to foster economic catch-up and structural transformation. Industrial hubs are relatively new to Africa but continue to attract attention from policymakers and researchers. However, empirical studies on African industrial hubs have been inadequate and, to date, have had only a limited influence on policymaking. Contrary to accepted wisdom, underperforming African industrial hubs offer an opportunity for policy learning from successes and failures. This paper aims to fill the existing knowledge gap from a policymaking perspective. It has three objectives: first, to demonstrate the diversity, the uneven and mixed outcomes, and the evolving nature of African industrial hubs; second, to provide insights and policymaking lessons through a comparative analysis of four diverse cases, namely those of Mauritius, the China-Africa economic and trade cooperation development zones, the Tanger Med Complex in Morocco and the recent experiment with industrial hubs in Ethiopia; third, to show that developing synergies to advance industrialization requires a strategic approach, integrating the state’s productive role and executive excellence within the broader industrial policy framework.

Global value chains (GVCs) generate significant effects on participating firms. But can GVCs affect other companies in the host economies? We propose a conceptual framework for GVC spillovers and test it using data for Russian manufacturing firms in 2009–2015. Using a panel estimation technique with random and fixed effects, we find that firms in industries that are intensively integrated into GVCs, on average, have higher total factor productivity (TFP), controlling for firm heterogeneity, industry and region fixed effects. TFP gains in GVCs are unequally distributed and depend on (i) the industry’s position in the GVC, (ii) the industry’s technological intensity and (iii) the firm’s TFP level. We relate the findings to the evidence of the “optimal” technological gap that maximizes productivity spillovers for national companies. The results are highly relevant for policymakers as they prove that trade policy and foreign direct investment attraction policy should not go hand in hand but should be incorporated into GVC-oriented policy to encourage the full range of TFP improvements in local (non-GVC-included) firms. To fully benefit from GVC-oriented policy, State policy should encourage the development of inter-firm links. In addition, our results support the importance of evolutionary structural changes in economic upgrading in GVCs and the strength of the role of policies oriented towards medium-technology industries as drivers of technological development.

This paper investigates the role of global economic uncertainty in Dunning’s investment development path (IDP) framework. By applying the dynamic panel threshold model to data from 76 developed and developing countries, we find that countries’ net outward investment (NOI) follows a non-linear pattern even after incorporating global economic uncertainty into the analysis. At the same time, global economic uncertainty has non-linear effects on NOI subject to the level of economic development. More importantly, our results show that NOI is path dependent, with correlation coefficients changing across the different stages of IDP, which implies that uncertainty affects countries’ progression to the next stage of IDP differently. From a policy perspective, our findings call for special attention to policymakers in less developed nations. Even though global economic uncertainty may not always have a negative effect or may even improve a country’s NOI for a while, it may deter the international expansion of local firms. In the presence of high global economic uncertainty, local firms are less likely to become outward foreign direct investors, which implies stagnation in internationalization.

The paper studies the internationalization of business research and development (R&D) from 2003 up to 2017. It highlights three major results: first, R&D expenditure by foreign-owned firms has been growing, but more slowly than R&D expenditure of domestically owned firms. This is mainly due to the fast growth of business R&D in China, where foreign-owned firms have only a small share of overall business R&D. Second, R&D internationalization has become more network-like and diverse in terms of industries and countries, and less dominated by single relationships between large nations. The rise of emerging economies as host and home countries is just one of several major shifts. Service industries have gained importance as well, but often remain invisible because only a few countries collect data on R&D internationalization in services. The internationalization of R&D has yielded considerable benefits for home and host countries in the form of higher aggregate R&D expenditure and spillovers. Political de-globalization, weakening international institutions and a focus on “national interest” in science and technology may threaten these benefits in the future. A continuation of the policy of nondiscrimination of foreign-owned firms and more, not less, international cooperation is necessary.

This paper analyses the major features of the 2020 Ethiopian investment law and their policy implications. The law has liberalized many areas of the Ethiopian economy to pave the way for increasing the private sector’s share and diminishing the Government’s role. It adopted the negative list approach to liberalization to simplify the process of determining investment fields that are open for foreign investors. It laid out procedures for handling investors’ grievances and for resolving investor–State disputes, principally through domestic institutions. It also obliges investors to discharge their corporate social responsibilities. The paper argues that these features of the law demand transparent, efficient and competent government institutions to properly regulate and protect investments and to attain sustainable development as the ultimate goal of the law. For this purpose, it also argues that two factors are essential: ensuring effective institutional coordination and supplementing the mandatory corporate social responsibility requirements with voluntary engagement. In addition, it contends that the Government needs to strengthen linkages between foreign and domestic investment, promote decent jobs and sustainability, enhance human resources and infrastructure, and build a stable political system to reap the significant development benefits of investment, as envisaged in the investment law. The paper also suggests that other countries, in Africa and beyond, can benefit from applying these lessons in designing or reforming their investment policies to maximize the sustainable development gains from foreign investment.

UNCTAD first published a list of the top 100 digital multinationals in the World Investment Report 2017. This research note builds on the analysis and conceptual framework on digitalization and foreign direct investment set out in that report. It provides an updated list, allowing for an analysis of trends over the five-year period including the COVID-19 pandemic and adds new features to the data set that will be exploited in forthcoming UNCTAD work. The note describes the methodology to create the new and extended data set and points at possible avenues for further work. The purpose of the research note is to provide academic scholars with the basic elements needed to pursue further research in this field.

The book is part of the series “New Horizons on International Business” launched by Edward Elgar Publishing. The title is simple, clear and attractive, and goes right to the heart of the issue discussed in the book — an exploration of the struggle for appropriation of value that is created in the global value chain (GVC). The book is based on a study of Bangladesh’s apparel industry, and it offers a detailed analysis of the complex complementary and competing relations between various participants in the GVC — workers, suppliers and global buyers as well as consumers — and how their respective power relations determine the value captured at every level of the industry GVC. In doing so the book touches upon some key issues regarding organization of GVCs, the role of the state and differences between different types of GVCs. It explores interdependencies between the multiple participants in a single GVC, leading to cross-influences among different contests that shape outcomes. It goes on to propose an alternative model for fair distribution of value based on interdependent relationships that interact with culture, institutions and political systems to shape and advance social welfare in GVCs — or in other words, “correct” for distorted distribution, as the subtitle of the book notes.