Transnational Corporations - Current Issue

This paper explores traditional knowledge and its possible utilization by multinational enterprises (MNEs) in achieving the United Nation’s Sustainable Development Goals, with a particular focus on Goal 13, Climate Action. We argue that traditional knowledge has been overlooked by business leaders and policymakers who have failed to explore its potential in tackling some of the “grand challenges” facing the global economy. We suggest that achievement of the Sustainable Development Goals could be accelerated with the active involvement of MNEs. The key issues are what sort of involvement should they seek and what challenges must be overcome. We also outline policies to support the wider dissemination of traditional knowledge through MNE involvement.

Industrialized countries increasingly use targeted subsidies to lessen firms’ disadvantages caused by climate change, geopolitical realignment of trade relationships and local COVID-19 pandemic dislocations. The debate over the United States Inflationary Reduction Act and the European Union criticism of it because of its effect on firms’ investment location choices exemplify how subsidies affect investment flows. We investigate to what extent different subsidy schemes affect firms’ investment location choices and explore the effect on two dimensions: immediacy (direct versus indirect) and firm specificity (firm-specific versus nonfirm-specific). Using a sample of United States MNEs and their investments in subsidiaries in the European Union and China, we find that direct subsidies have a greater positive effect on investment than indirect subsidies, and that non-firmspecific subsidies have a greater positive effect than firm-specific subsidies. Our study establishes a more nuanced understanding of subsidy effects, suggesting that policymakers should align their subsidy schemes for attracting foreign direct investment accordingly.

As global value chain (GVC) participation and knowledge spillovers have arguably become more crucial for countries, it is still challenging to measure their real value for countries. The complexity comes from the trade in intermediate goods as part of GVCs and the inability to track their coupling with additional components and services. The result is double counting and lack of clarity about the real value of GVCs for countries. This paper assesses how GVC participation and knowledge spillovers influence double counting and transitively the innovation and value added growth in GVCs for the case of Japan. The empirical evidence suggests that expanding production fragmentation within GVCs and diversifying foreign suppliers in production stages foster innovation and maximize knowledge diffusion, leading to enhanced value added output. Thus, knowledge spillovers and feedback effects within and between countries at bilateral and multilateral integration levels affect the GVCs. The paper sheds light on the intricate nature of intermediate goods flows in GVCs and the link between double counting and knowledge spillovers in GVCs.

UNCTAD’s eighth World Investment Forum 2023 (WIF23) provided the opportunity to tap into the latest research and academic thinking to strengthen the support and advice to Member States. The forum had more than 150 sessions and 8,000 attendees, including more than 1,100 speakers. Heads of state and government, ministers and international organization representatives attended, as well as policymakers and legislators, parliamentarians, heads of investment promotion agencies, treaty negotiators, regulators, chief executive officers and other executives of multinational enterprises (MNEs), academics and civil society.

This note explores the literature on the determinants of foreign direct investment and domestic savings. With respect to foreign direct investment, it argues that institutional quality is the key driver of the type of investment that is necessary for structural transformation. With respect to domestic savings, focusing on sub-Saharan Africa, which lags behind other regions in savings rates, it suggests that there needs to be a stronger emphasis on long-term capital needs of the region. Policymakers can support the growth of pension and capital markets and the fintech sector through appropriate reforms and through re-orienting sovereign wealth funds towards more developmental purposes.

The recently completed 2023 World Investment Forum in Abu Dhabi saw a rare confluence of leaders from public, private and civil society sectors gathering at dozens of scheduled and dozens more impromptu meetings aimed at building better cross-sector relationships and a common understanding about current best practices and near-term trends in sustainable development around the world. Here is what I took away from those meetings: (1) discussions there were building an investment regime to guide leaders within and across sectors who are trying to achieve the Sustainable Development Goals, leading to faster economic development and better environmental, social and governance practices; (2) debates there were focusing on how and how quickly to build that regime and reach those goals with investment projects based on public-private-partnerships; and (3) occasional dissent there about how to build that regime and reach those goals reminded some about inconvenient evidence-based truths about investor–State dispute settlement clauses in bilateral investment treaties and foreign direct investment. I elaborate on those points and conclude with some personal reflections and suggested additions to future meetings aimed at building that investment regime and advancing towards those development goals.

A central message that came out of the 8th UNCTAD World Investment Forum was the urgent need for innovative solutions to facilitate the integration of least developed countries (LDCs) in the global trading system. In this article, I suggest that the international community should consider implementing a “Global Value Chains for LDCs Initiative” as an integral part of such a solution package. This initiative proposes to make the value added exports of LDCs exempt from duties throughout their entire journey along global value chains. I discuss the mechanisms through which this initiative enhances the attractiveness of integrating LDCs into global value chains. Furthermore, I elaborate on how it can foster the creation of new metrics related to Sustainable Development Goals, encouraging corporate engagement in incorporating LDCs in their supply chains. Overall, the initiative proposes new pathways through which the global trading system can boost the involvement of LDCs in the global economy.

To address the grand challenges that society faces, incremental change and gradual organizational renewal are not sufficient. A radical transformation of business models is needed. In this paper, we explore game-changer business models that incorporate sustainability principles into their organizational DNA. We draw on two examples from the agrifood sector to illustrate the components of the business model, the impact of Industry 4.0 technologies and the sustainability outcomes. We reinforce the importance of collaboration between policymakers, business leaders and researchers to identify, promote and scale up these business models for transformative societal change.

In this research note, we propose a novel and innovative measure for the internationalization of digital firms. Our measure overcomes some of the weaknesses that inhibit traditional measures of internationalization in their application to digital firms. The measure uses Google Trends data and captures the volume and distribution of a digital firm’s recognition in the digital universe. In addition to developing the measure, we conduct empirical tests to apply our internationalization measure to traditional and digital firms and compare our results to data from UNCTAD’s Transnationality Index. Our empirical comparison offers insights into the internationalization of digital firms. We discuss these insights and offer an impetus to developing a theory of digital internationalization.