International Trade and Finance
Foreign direct investment in renewable energy: Trends, drivers and determinants
Adding value in Global Value Chains
Under African skies – mining TNCs in Africa and the Sustainable Development Goals
Interaction between transnational mining companies (mining TNCs), governments, mining industry bodies and local communities is critical to advancing several of the Sustainable Development Goals (SDGs). Mining TNCs may be leaders or conspicuous laggards in this regard. Some larger mining companies have made significant corporate social responsibility (CSR) progress and implemented effective sustainable development, thereby boosting their legitimacy. Individually, some African countries have established global, standard, mining codes of conduct; collectively, African governments are organizing to establish regional licensing standards, CSR guidelines and codes of conduct such as the Africa Mining Vision. Comparing two mining TNCs cases, we illustrate paths of progress and problems and predict their directions in Africa. Although we expect the United Nations Global Compact and the Global Reporting Initiative to remain the main vehicles and provide benchmarks that move the mining industry towards achieving the SDGs, these vehicles need to be expanded to include targets that currently are only implicit, such as gender equality and sustainable community development.
The sustainable development effects of investment by emerging-market multinationals: Shaping beneficial outcomes for home and host country
Emerging-market multinational enterprises (EMNEs) play an increasingly important role as investors in developing economies. When certain conditions are met, their foreign investment can contribute to host-country progress towards the Sustainable Development Goals (SDGs). Moreover, foreign investment by EMNEs could also bring positive development effects for the home economies from which they internationalize. However, some concern exists about the possibility that gains will not be equitably shared or that potential will be not realized in one or the other. This article aims to shed light on the conditions that will allow both the home country of an EMNE and the host country receiving its investment to make progress towards the SDGs. Five areas for policy action are presented, together with a research agenda. It is argued that the most promising measures encourage foreign investment to be long-term, stimulate linkages between EMNEs’ home-country partners and host-economy firms, incentivize home- and host-country firms to take on new roles within global value chains, capitalize on institutional upgrading potential and tie certain conditions to the right to access natural resources. Both home and host countries could then potentially benefit from EMNEs’ outward investment and make progress on goals related to poverty alleviation (SDG 1), economic growth and the creation of decent work (SDG 8), infrastructure development (SDG 9) and institutional upgrading (SDG 16).
Does tax drive the headquarters locations of the world’s biggest companies?
In recent years, policy-makers have given paramount attention to “competitiveness”, working to ensure that domestic economies attract investment, jobs, and tax revenues. Toward this end, countries have steadily lowered corporate tax rates in an attempt to attract mobile international businesses. This paper discusses the desirability of this policy stance in light of data on the world’s biggest companies. Using Forbes lists of the top “Global 2000” companies over the period 2003–2017, the paper analyzes companies’ headquarters locations, focusing on economic, geographic, and policy determinants. The paper then relates these findings to larger policy questions.
Latin American governments in the promotion of outward FDI.
A main issue in growing outward foreign direct investment (OFDI) from emerging economies is the participation of home governments. This paper focuses on governments in Latin America and how they are promoting the OFDI of their domestic enterprises. Brazil, Chile and Mexico are the leading countries in Latin America supporting OFDI, although only Brazil has an active policy and institutional arrangements for supporting home enterprise internationalization. Governments in Latin America need to develop their institutional environments and create suitable conditions for enterprises to expand internationally.
Global production networks and foreign direct investment by small and medium enterprises in ASEAN.
This paper examines cross-border investments by small and medium enterprises (SMEs) from member states in the Association of South-East Asian Nations (ASEAN). It explains this relatively under-researched topic from the perspective of SMEs’ strategic coupling with or “plugging into” regional production networks coordinated by global lead firms. Facilitated by growing regional integration, these SMEs create and capture significant value added from their involvement in these production networks. The paper first highlights the different drivers of SME-specific FDI activities in ASEAN that contribute to strengthening regional economic integration through intra- and inter-firm activities in the region. The paper then explains the working of their strategic coupling with ASEAN-based production networks through different coupling mechanisms, such as international partnership, industrial specialization and production platforms. The key challenges confronting SME regionalization are highlighted. Finally, the paper considers the policy and practice of promoting SME regionalization so that they can plug into the growth dynamics of different regional production networks.
Transnational corporations and International production: Concepts, theories and effects (Second Edition)
UNCTAD-EORA Global Value Chain Database: methodology and further research agenda
How subsidiaries influence innovation in the MNE value chain
As multinational enterprises increasingly disaggregate their value chains and assign functional responsibilities to foreign subsidiaries, they are increasingly focused on augmenting spatially distant activities and resources. At the same time, despite subsidiary managers operating at the “middle” of the organization and having awareness of operational and strategic contexts, they have received significant criticism for hindering the successful coordination and integration of value chain activities. This appears counterintuitive as, on the one hand, MNEs are increasingly disaggregating their value chains and, on the other, subsidiary managers act as frontline managers, at the intersection of their local context and the MNE. We examine the resource stocks of six subsidiaries and the activities of subsidiary managers locally and across global value chains. The results indicate that integration responsibilities are decentralized, as properties of subsidiary mandates, and that the subsidiary managers’ connectivity activities significantly affect the strategic influence that they subsidiary can exercise locally and globally. The results also contain important information for policymakers.
UNCTAD insights: FDI in the digital economy: A shift to asset-light international footprints
The digital economy is becoming an ever more important part of the world economy. It is revolutionizing the way we do business, and it has important implications for foreign direct investment (FDI). However, little systematic analysis has been done to investigate the investment patterns of digital multinational enterprises (MNEs). This study, conducted in the context of UNCTAD’s World Investment Report 2017 (WIR17), is an attempt to fill some of the gap in knowledge and to provide an impetus for future research. It proposes a new interpretative framework for the digital economy, builds an extensive sample of digital and ICT MNEs, and profiles their international operations. Its main findings are that MNEs in highly digitalized industries have a “lighter” FDI footprint than traditional MNEs; they tend to concentrate their operations in a few highly developed countries and their investment patterns are shaped by fiscal and financial motives more than those of traditional MNEs. As digital technologies and business models tend to disseminate across the broader economy, this may suggest the onset of a new era of international production and MNE internationalization paths. This paper sheds light on the methodology underpinning the analysis in WIR17 to ensure full replicability and to prepare the ground for further work in the area. It also builds further on the discussion in WIR17, proposing broader implications for international business and new avenues for future research.
Factors contributing to the strength of national patent protection and enforcement after TRIPS
In this paper we study the determinants of the strength of patent enforcement in 43 member countries of the World Trade Organization (WTO) between 1998 and 2011, a period after the signing of the Trade-Related Aspects of Intellectual Property Rights (TRIPS) agreement. We do so by building on and expanding the seminal work of Ginarte and Park (1997) on the pre-TRIPS determinants of patent rights in the years 1960-1990. We find that in the years after TRIPS was signed, the strength of patent enforcement of a country is positively determined by two variables that signify the usage of the patent and intellectual property system, the number of patent and trademark applications. We also find that the level of research and development expenditure, the quality of human capital, and the level of development of a country have positive effects on the strength of the enforcement of patent law in practice. Intellectual property rights enforcement is one of the key investment-related policies included in the United Nations Conference on Trade and Development (UNCTAD) Investment Policy Framework for Sustainable Development. Identifying the determinants of strong patent systems will help policymakers at the national and supranational levels to design and implement effective policies that strengthen national patent systems, thereby enhancing economic benefits such as greater levels of commercialization of intangible assets and greater levels of international trade and investment.
The role of TNCs in the extractive industry of Botswana
Guest editor’s introduction to the special issue: Indian outward FDI and MNEs.
Following the ongoing liberalization and openness measures begun in the 1990s, an increasing number of Indian firms have progressively taken to outward FDI (OFDI), in line with their efforts to diversify away from domestic markets. This expansion has been heightened by market competition on firms’ home turf, the continued high growth of the home economy (leading to investible resources) and considerably expanding business prospects worldwide. Internationalization has gained strategic importance in the survival and growth of capable Indian firms in recent periods.
Governance transparency among the largest multinational corporations: Influence of firm, industry and national factors
An FDI-driven approach to measuring the scale and economic impact of BEPS
This paper explores the link between foreign direct investment (FDI) and the BEPS (base erosion and profit shifting) practices of multinationals (MNEs). It puts the spotlight on the outsize role of offshore investment hubs as major players in global corporate investment, a role that is largely due to MNEs’ tax planning, although other factors contribute. The paper shows that tax avoidance practices enabled by FDI through offshore hubs are responsible for significant leakage of development financing resources. In policy terms, these findings call for enhanced cooperation and synergies between international tax and investment policymaking.
Diverse paths of upgrading in high-tech manufacturing: Costa Rica in the electronics and medical devices global value chains
Costa Rica has sought to improve its position in the global economy by prioritizing export growth in two high-tech manufacturing industries led by foreign direct investment (FDI): electronics and medical devices. We use a global value chain (GVC) perspective to identify key commonalities and contrasts in Costa Rica’s performance in upgrading these two sectors. Because the electronics and medical devices GVCs have very different structures in Costa Rica (electronics is dominated by a single large firm, Intel, whereas medical devices has a highly diversified set of foreign manufacturers), multiple forms of upgrading, downgrading and knowledge spillovers are possible. Although the experience of these two industries illustrates different paths to upgrading, developing backward linkages in Costa Rica was not the preferred nor the only way of moving up the value chain. The medical devices sector exhibited more traditional knowledge spillovers and labor market features of local industrial agglomerations, whereas the electronics sector demonstrated significant wage and skill-level gains because of the incorporation of high-value service activities due to the evolving global strategy of its GVC lead firm, Intel. By combining a GVC perspective with a focus on knowledge flows and value creation at the local level, we seek to promote more explicit integration of international business and economic geography concepts and methods.