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1 – 10 of 469The UN Global Compact promotes values of precautionary approach to environmental changes and business sustainability, which are eagerly embraced by MNCs; however the recognized…
Abstract
Purpose
The UN Global Compact promotes values of precautionary approach to environmental changes and business sustainability, which are eagerly embraced by MNCs; however the recognized emerging country risks pose a challenge for continuous commitment to those principles in the subsidiaries. Especially political and currency risks are considered significant in the subsidiaries located in the emerging markets. Therefore, those risks are often shifted to the local partners as the pursued core principle of the risk management strategies. The objective of MNCs is in fact to limit MNCs responsibility for the liabilities and losses in the emerging markets in case of market downturns, and in effect the advocated risk management practices exacerbate the severity of the emerging market crises.
Methodology/approach
The chapter explores those corporate practices on the examples of numerous major international market players in case of several historical, but recent examples of the emerging market currency crises.
Findings
The concerns addressed in the chapter include: the preference for local financing exposing at risk local banking sectors in the emerging markets, excessive liquidity and minimal capital commitments and investments leading to weaker currency fluctuations and resulting in private capital speculations and capital flight (to safety or to quality). The intensified global competition for international investments in form of FDIs resulted in the erosion of the capital requirements, reduced social and business infrastructure commitments requested, limited currency controls, and other components of the regulatory framework easing in the emerging markets. Other identified in the research key components of the risk management strategies applied by MNCs, destabilizing the emerging markets in financial (both fiscal and currency) crises include: intercompany payments and financing such as: transfer pricing, local sourcing and reimbursements for both tangible and intangible assets transfer.
Implications
Demonstrated approach of MNCs appears ethically questionable and reflects the disparity of the bargaining powers. It also undermines the intentions of the Ten Principles of the UN Global Compact. The corporate citizenship is found difficult to dominate over the conflicting self-centered interests of MNCs operating in the emerging markets, especially in times of crises. The consideration of the non-compulsory ethically based initiative, as the alternative to the failing effectiveness of the international market regulations, requires restoration of the public and an individual value of the reputation (image, name) built on social responsibility and accountability, unfortunately so much diluted over the last two decades.
Originality/value
The chapter examines the effect of MNCs risk management of their foreign operations on the crises in the emerging markets with focus on inward FDIs flows and inward FDIs stock fluctuations and debt financing. The results evidence the repetitive nature of the self-interest driven corporate behavior.
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Marco Ferretti and Adele Parmentola
The purpose of this paper is aimed at analysing the influence of the host government policies on foreign direct investment (FDI) knowledge spillovers.
Abstract
Purpose
The purpose of this paper is aimed at analysing the influence of the host government policies on foreign direct investment (FDI) knowledge spillovers.
Design/methodology/approach
Starting from the analysis of the literature, the paper has introduced a theoretical model that has been illustrated analyzing the Iranian case.
Findings
Governments can promote the realisation of knowledge spillovers only if they create the conditions for improving the absorptive capacity of local firms and the connections between local firms and foreign investors (strategic approach). Moreover, in many emerging countries, governments are directly involved in relationships with foreign investors through state‐owned companies. According to this, the Iranian case shows how the direct government involvement, if it is matched with a strategic approach, can encourage the realization of FDI knowledge spillovers.
Research limitations/implications
The paper presents some limitations: other quadrants of the proposed model need to be further explored adopting other case studies; moreover, the Iranian case can be examined more in deep.
Practical implications
From a policymaker's point of view, the paper is an useful tool because it gives them many suggestions about what FDIs attraction policies have to be adopted in order to realize FDI knowledge spillovers.
Originality/value
From a theoretical point of view, the paper gives a contribution to the literature on FDI spillovers highlighting the direct relationships between host government policies and FDI knowledge spillovers, especially revaluing the opportunities stemming from a direct government intervention. Moreover, this paper contributes to increase the knowledge on the Iranian context often neglected by international management studies.
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Undertakes the formalization and development of a simulational interactive macroeconometric model for Malaysia. Focuses on theoretical perspectives but covers applied aspects of…
Abstract
Undertakes the formalization and development of a simulational interactive macroeconometric model for Malaysia. Focuses on theoretical perspectives but covers applied aspects of the model relating to the factual case of Malaysia. Discusses the principal goals of attaining economic growth with distributive equity as spelt out in the Malaysian New Development Plan. Formalizes and interprets the structural model system and its reduced forms. Concludes that a demand‐driven economy governed by profit rates (yield rates) is the centrepiece of a dynamically growing economy. Shows that the interactive model system learning in and through an econometric modelling must evolve from an extensive economy‐institution‐society interface.
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The current study contributes to filling the gap in studies that discuss the impact of foreign direct investment (FDI) on economic growth and employment in Saudi Arabia. Although…
Abstract
Purpose
The current study contributes to filling the gap in studies that discuss the impact of foreign direct investment (FDI) on economic growth and employment in Saudi Arabia. Although the study found that FDI inflows contribute to the government effort to reduce or at least control the high unemployment rate, the study found no relationship between FDI inflows and economic growth in Saudi Arabia. However, we must be careful in interpreting the result of the positive influence of FDIs on employment since almost half of the Saudi workforce is employed by the public sector. The paper aims to discuss these issues.
Design/methodology/approach
Data regarding FDI inflow to Saudi Arabia were collected from the World Bank database and the Saudi Arabian General Investment Authority (SAGIA), while GDP per capita (economic growth) used data from the World Bank database only. Unemployment rate data were collected from the SAMA annual book. This study covered the period from 1999 through 2012. The study used the time series analysis methodology to study the impact of FDI inflow on economic growth and employment in Saudi Arabia.
Findings
Although the current study found that FDI inflows contribute to the government’s effort by reducing or at least controlling the country’s high unemployment rate, it also found no relationship between FDI inflows and economic growth in Saudi Arabia. However, we must be careful in interpreting the result of the positive influence of FDI on employment since almost half of the Saudi workforce is employed by the public sector.
Originality/value
In recent years, the government of Saudi Arabia has issued a number of initiatives to achieve diversification of income sources, create jobs for Saudi workers, and transfer advanced administrative techniques and technology to the Saudi economy; one of these initiatives involves attracting foreign investors to the Saudi market. This study contributes to fill the gap in studies that discuss the impact of FDI inflows on economic growth and employment in Saudi Arabia.
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Xiaoyan Luo and Michał K. Lemański
To understand the rationale for foreign direct investment of Chinese electronic companies, their location decisions and entry mode choices
Abstract
Purpose
To understand the rationale for foreign direct investment of Chinese electronic companies, their location decisions and entry mode choices
Methodology/approach
Secondary data on foreign direct investment of the top 100 companies in China’s electronics industry are analysed. The first part covers an exploratory analysis of the industry and the second part presents a comparative longitudinal analysis of three case studies of representative companies: Haier, Huawei, and Lenovo.
Findings
The three key findings are: (1) market-seeking is the primary motivation for foreign direct investment of Chinese companies in the electronics industry, yet the strategic-asset-seeking gains importance as the internationalization of the company advances; (2) foreign investment path normally starts at adjacent foreign markets, but more distant markets are gradually targeted and become more important for the company; (3) wholly owned investments are the preferred market entry modes in the international expansion.
Research limitations/implications
This research is based on secondary data, and more in-depth, interview-based studies are needed to explore the perceptions of decision-makers, and a plethora of contextual factors, which result in specific market entry decisions. As only the 100 largest companies were studied, future research should put under scrutiny also internationalization of smaller firms.
Practical implications
Implications of such findings are discussed in the light of classic internationalization theories as well as the current research on internationalization of companies from emerging/developing countries.
Originality/value
Provides an account of foreign direct investment in a context of a substantial and growing importance for the practice of international business, and identifies an agenda for promising future scholarly inquiries.
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Dalia M. Ibrahiem and Rasha Sameh
Achieving the goals of the sustainable development strategy and Egypt’s vision 2030 depends mainly on the existence of sources of funds. And since Egypt faces a great challenge in…
Abstract
Purpose
Achieving the goals of the sustainable development strategy and Egypt’s vision 2030 depends mainly on the existence of sources of funds. And since Egypt faces a great challenge in obtaining finance, then analyzing the drivers of financial development is a vital issue and there is a persistent need to shed light on the key obstacles for it. Thus, this paper aims to empirically assess the impact of natural resources, foreign direct investment (FDI) net inflows, education and clean energy sources on financial development in Egypt using the data of the 1971–2014 period.
Design/methodology/approach
The paper uses auto-regressive distributed lag and Toda-Yamomoto approaches to fulfill the purpose.
Findings
Empirical results signify that all variables except natural endowments stimulate financial development which can suggest the presence of the natural resources curse in Egypt. Moreover, the feedback effect between financial development and FDI is recognized. Clean energy sources cause financial development and natural endowments. Financial development causes natural endowments and FDI leads to the deployment of more clean energy resources.
Practical implications
Several crucial policy implications are suggested based upon these results as improving the quality and quantity of education and encouraging both domestic and foreign investors by providing several incentives. Moreover, the government has to enhance green finance through financing solar energy projects and other environmentally friendly projects.
Originality/value
It is the first research for Egypt that explores natural resource-financial development nexus using time series analysis according to our information, and two important variables are included in the model which is clean energy sources and FDI. Then, although several studies examined the impact of financial development on clean energy no empirical study before assessed the impact of clean energy on financial development.
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This paper aims to analyze existing corporate governance rules which aim to regulate and control the following type of problems: to restore confidence in the financial markets, to…
Abstract
Purpose
This paper aims to analyze existing corporate governance rules which aim to regulate and control the following type of problems: to restore confidence in the financial markets, to reformulate the existing corporate governance systems and mechanisms that have been inadequate, and, finally, to rethink the relationship between ethics and economy. It also aims to identify the factors determining the corporate governance systems and mechanisms in a global economy.
Design/methodology/approach
The paper reports the results of a comparative analysis between different corporate governance systems and mechanisms. In addition, in order to explore the role of institutional determinants in attracting foreign direct investment (FDI) flows, this study considers variables such as an index of shareholder protection, openness to FDI and the interaction between the two above mentioned variables.
Findings
This analysis confirms the economic theory that less open countries are characterized by stronger ownership restrictions and a weak corporate governance mechanism. Conversely, open market and investment regimes are particularly powerful instruments to attract investment in general and FDI in particular.
Originality/value
This study provides a survey of the main system and mechanisms of corporate governance all supported by a survey of recent developments regarding the empirical analysis on the role of institutional determinants in attracting FDI flows.
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