International Trade and Finance
Corporate sustainability assessments: MNE engagement with sustainable development and the SDGs
The recent introduction of the Sustainable Development Goals (SDGs) calls for an understanding of how multinational enterprises (MNEs) engage with sustainable business practices and how the SDGs may be better implemented by the private sector. Through an examination of 112 MNEs operating in the region of the Association of South-East Asian Nations this study focuses on evaluating sustainable business practices through the lens of a corporate sustainability assessment framework. The results show that headquarters commitments of MNEs to international sustainability standards and guidelines had a key influence on their sustainability practices. These commitments included the use of tools such as the materiality analysis to identify and prioritize sustainability issues of importance to the MNE and its stakeholders and reflects a focus at the local level of the subsidiary that was in alignment with the corporate strategies of company headquarters. The results of this exploratory study suggest that it is through the use of these international sustainability standards and guidelines (such as the Global Reporting Initiative standards) that a greater consideration and incorporation of SDGs within MNE practices can be achieved. These standards and guidelines are both well accepted and already adopted by MNEs and have an important influence on what sustainability issues and goals they consider within their operations.
Microfinance for poverty alleviation: Do transnational initiatives overlook fundamental questions of competition and intermediation?
Numerous microfinance initiatives around the world aim to alleviate poverty in developing countries. However debate persists about their effectiveness and sustainability – a concern for transnational corporations and the international business community which contribute about $9.4 billion to microfinance funding. In this policy-oriented article we aggregate findings from two studies in Indonesia that help explain why moneylending can still thrive when low-interest microfinance is widely available and why the poorest borrowers benefit less than the less-poor. To avoid methodological debates about validity we interview market participants and triangulate the perspectives of borrowers with those of formal and informal lenders. Importantly our research includes current and past borrowing from formal and informal sources prompting participants to draw comparisons. We find that the importance to borrowers of key characteristics of informal lending is insufficiently recognized and that inappropriate human resource management and informal intermediation are significant problems. The latter can be an unintended consequence of formal microfinance: The availability of formal low-interest microfinance creates informal intermediation opportunities for entrepreneurs often developing from casual intermediation into systematic deception. We discuss implications for microfinance policy with reference to the United Nations Sustainable Development Goals and offer suggestions for further research.
Exploring the interface of CSR and the Sustainable Development Goals
Transnational corporations (TNCs) today are facing rising expectations that they will engage with societal stakeholders and get involved with sustainable development even in light of an increasingly uncertain international business environment. This article explores how the Sustainable Development Goals (SDGs) as a global agenda may serve as a reference framework that can support TNCs in improving their corporate social responsibility (CSR) engagement in a way that contributes to sustainable development. The authors specifically consider the role of systematically measuring and managing corporate impacts on sustainable development as a prerequisite for demonstrating a net contribution to the SDGs. In order to capture these impacts existing corporate measurement and evaluation systems need to be adapted and new management instruments have to be developed. We conclude by proposing a research agenda for this purpose.
China’s international investment strategy by Julien Chaisse (editor)
Chinas international investment law and policy have been the subject of detailed study since the liberation endeavour of the late 1970s which was a landmark change in the countrys development path and integration into the global economy. The countrys active participation in the global economy is mirrored by its evolving profile of cross border capital flows with China both a prominent source of and destination for foreign investment. Indeed Chinas rise as a global investor has made its approach to international investment an important issue on which a considerable amount of literature has already been published. The recent past has nevertheless seen several important events within China as well as bilateral regional and global events influencing Chinas approach towards international investment and adding new perspectives thereto.
Looking through conduit FDI in search of ultimate investors – a probabilistic approach
This paper presents a novel computational method to determine the distribution of ultimate investors in bilateral FDI stock. The approach employs results from the probabilistic theory of absorbing Markov chains. The method allows for the estimation of a bilateral matrix that provides inward positions by ultimate counterparts for over 100 recipient countries covering 95% of total FDI stock and including many developing countries. Reconstructing the global FDI network by ultimate investors enables a more accurate and complete snapshot of international production than do standalone bilateral FDI statistics. This has considerable implications for policymaking. It also provides more nuanced context to some contemporary developments such as the trade tensions between the United States China and others as well as Brexit.
Raising corporate debt in India: Has foreign ownership been an asset or a liability?
The impact of international R&D on home-country R&D for Indian multinationals.
Extant research on internationalization of research and development (R&D) has not examined what the impact of foreign R&D investments is for the investing corporate parent firms in particular on domestic R&D investments. The aim of this paper is to examine the effectiveness of international knowledge sourcing through foreign R&D in an empirical analysis of the effects of foreign R&D investments on domestic R&D intensity for a panel of Indian firms. The paper specifically investigates the importance and impact of the role and the location of foreign R&D centres on parent-company R&D by analysing differences between foreign-technology-seeking and foreign-technology-exploiting R&D and between centres in advanced countries and in developing countries. The analysis finds contrasting results between advanced and developing countries and between technology-exploring and technology-exploiting investments.
The multinational and the legitimation of sustainable development
The Sustainable Development Goals (SDGs) recently promulgated by the United Nations General Assembly provide an opportunity to assess the potential contributions of multinational enterprises to sustainability initiatives. This article seeks to promote understanding of the context within which multinationals will or can decide to participate in such initiatives by adopting a legitimacy perspective. When viewed from the perspective of organizational legitimacy the extent to which a multinational adopts a sustainability agenda is likely to depend on its stakeholder network and the balance of the network’s variety of interests and beliefs. The article discusses current and prospective multinational activities that support the SDGs while also bolstering organizational legitimacy and concludes with questions for future research.
Home-country measures to support outward foreign direct investment: variation and consequences
The state especially in emerging economies plays a key role in influencing firm behaviour including outward foreign direct investment (OFDI). Often literature on the state’s influence on OFDI stresses direct state ownership. However the state can influence OFDI in several ways including policy support and subsidies; the literature has largely overlooked these effects. We build on key insights from the comparative capitalisms literature to put forward a series of propositions on how home-country measures – in both emerging and developed economies – to boost OFDI will influence inter alia the volume location and mode of firms’ investments abroad. We thus contribute to the literature by showing how government policies across a wide range of countries influence an important aspect of firm behaviour that has economic social and environmental implications.
Determinants and motives of outward foreign direct investment by China's provincial firms
FDI, the global crisis and sustainable recovery
Estimating the fiscal effects of base erosion and profit shifting: data availability and analytical issues
The multilateral efforts led by the Organisation for Economic Cooperation and Development (OECD) to address base erosion and profit shifting (BEPS) have attracted much attention from tax policy makers practitioners and academics. In 2012 the OECD/G20 BEPS Project was launched to address BEPS through a range of international tax policy measures. A key part of the BEPS package was the Action 11 report which considered the fiscal and economic impacts of BEPS and produced an empirical estimate of the global corporate income tax (CIT) revenue losses arising from BEPS of between 4 per cent and 10 per cent of global CIT revenues. This research note highlights some of the data-related and methodological challenges facing researchers attempting to estimate the fiscal impacts of BEPS discusses some of the methodological approaches that have recently been applied to this end and provides a preview of the forthcoming release of the first edition of the OECD Corporate Tax Statistics.
Transfer pricing and state aid: The unintended consequences of advance pricing agreements
An advance pricing agreement (APA) is a formal arrangement between a tax authority and a multinational enterprise (MNE) in which the parties jointly agree on the MNE’s transfer pricing methodology estimated taxable income and tax payments for a fixed period thus reducing the likelihood of an income tax dispute. We argue that APAs which were developed by governments to solve MNE-state problems in one realm (international taxation of related party transactions) have had unintended consequences for both parties due to the spillover impacts of APAs into other policy realms. We explore this argument in the European Union state aid cases where in the context of competition policy APAs can be viewed as hidden discretionary policies that can be misused by lower-tier governments to attract or retain inward foreign direct investment by offering individual MNEs preferential tax treatment. Our paper contributes to this literature by analyzing the unintended consequences of APAs and recommending policy changes to reduce these negative spillovers.
The motives of Russian state-owned companies for outward foreign direct investment and its impact on state-company cooperation: observations concerning the energy sector
Palestine: Women beating barriers to export
Nepal: Landlocked but released by new trade opportunities
Opening the door to exports for Peruvian smallholders
How ITC came back into focus - Interview: J. Denis Bélisle, Executive Director of the ITC, 1994 - 2006
Doing good and doing it well - Interview: Patricia Francis, Executive Director of the ITC, 2006 - 2013
Who needs special and differential treatment?
Arancha González, Executive Director, ITC
Harnessing the spirit of global trade
The European Union: Partners in trade
Small steps towards a big renaissnce for Liberia
The next generation of African talent
Peru: A trade environment in which Peru can boost regional trade and exports
Fifty years of promoting trade and development
Banking on collaboration between India and Africa
Agenda from 15 June 2014
Problems of regulatory governance in the mining sector in Asia
UNCTAD’s Investment Policy Reviews: Key policy lessons
Oded Shenkar. Developing China: the Remarkable Impact of Foreign Direct Investment by Michael J. Enright
At a time when globalization is increasingly challenged it is rewarding to read a book that touts the promise of globalization in particular the benefits of foreign direct investment (FDI). While international trade takes centre stage in the popular media FDI is not only related to it but also at least as important in its own right not just economically but also politically geopolitically socially and otherwise. As most economic and social phenomena it has multiple facets of which the author chooses to highlight one namely its critical role in economic growth and development.
Book review: Navigating Global Business: A Cultural Compass by Simcha Ronen and Oded Shenkar
The world has changed dramatically over the last two decades moving through two distinct phases of globalization. Tapping into the rapid growth of goods and services trade (WTO 2016a) the first wave of globalization was propelled by value chains enhancing specialization productivity and access to markets (Reeves and Harnos 2017; OECD 2017). The second is marked by digitalization and it is characterized by the flow of ideas information and innovation which has further enabled the exploitation of global business opportunities through internet applications.
Enhancing the contribution of FDI to development: A new agenda for the corporate social responsibility community, international labour and civil society, aid donors and multilateral financial institutions
Twenty years of the World Investment Report: Retrospect and prospects
Multinational enterprises and the global economy
Act of creation: the OECD/G20 test of “value creation” as a basis for taxing rights and its relevance to developing countries
This paper examines the use of the “value creation” concept that plays a central role in current OECD/G20 and European Union taxation work as a way of determining the taxation rights of countries especially in the increasingly digitalised economy. It examines the likelihood of a consensus on whether it is an appropriate test particularly with a view to the interests of developing countries. It also notes the need for such countries to ensure that their “policy space” in corporate taxation that is based on the place of consumption is not unduly limited by these developments.
Guest editors’ introduction to the special issue: The contribution of multinational enterprises to the Sustainable Development Goals
In December 2015 the United Nations (UN) General Assembly accepted a set of 17 Sustainable Development Goals (SDGs) to succeed the Millennium Development Goals (MDGs). The goals encompass interconnected and actionable targets that address a broad range of development issues and represent the 5 Ps: people planet prosperity peace and partnership that were delineated in the 25 September 2015 UN resolution in which the SDGs were adopted. In contrast to the MDGs the SDGs explicitly call for a wide range of actors including the private sector to be involved and progress on many of the 17 SDGs will strongly depend on private sector contributions. For example SDG 12 responsible consumption and production urges MNEs to adopt sustainable practices and to integrate sustainability information into their reporting cycle. In addition Goal 17 emphasizes partnerships for the goals recognizing the need for cooperation between the private sector public organizations and civil society for the achievement of all the SDGs.
TNC’s global characteristics and subsidiaries’ performance across European regions
Establishing the baseline: estimating the fiscal contribution of multinational enterprises
Tax revenues from multinational enterprises (MNEs) are an important source of public finance in developing economies. The research and policy debate so far have mostly focused on the “missing” part i.e. the government revenues lost due to the tax avoidance practices of MNEs (Bolwijn et al. 2018). In this study we take a different but complementary approach looking at the taxes and other revenues actually paid by foreign affiliates of MNEs to developing-country governments. We present two alternative methodologies to estimate foreign affiliates’ fiscal contribution – the contribution method and the foreign direct investment (FDI) income method – and show that they lead to the same order of magnitude. The findings allow us to set a baseline for an informed discussion on tax avoidance by MNEs.
Research methods in international business by Lorraine Eden, Bo Nielsen and Alain Verbeke
Capturing a fair share of fiscal benefits in the extractive industry
Emerging-Market multinationals, human rights, and sustainable development: Lessons from the Canadian experience
Locational criteria of activities related to innovation: An econometric study of industry-level data for OECD countries
Book reviews: Indian multinationals in the world economy – Implications for development
MNE subsidiaries’ adoption of gender equality and women empowerment goal: A conceptual framework
This article explores the possible response types of multinational enterprise (MNE) subsidiaries in adopting the gender equality and women empowerment goal number 5 of the 17 United Nations Sustainable Development Goals (SDGs). MNE headquarters’ commitment to gender equality does not necessarily get translated to their subsidiaries’ priority because of the strategic value the subsidiaries see and the legitimacy pressure they experience. Drawing on institutional theories and the literature on the transfer of organizational practices in MNEs we propose a two-dimensional (value added to strategy and legitimacy pressure) framework describing four major types of subsidiary response – resistance compliance conformity and commitment. Understanding these response categories would help global agencies and host-country governments adjust their efforts to enhance local legitimacy for SDG adoption. Our simple typology could also facilitate scholarly and practical discussion. We end our discussion with some suggestions for future research.