Presence Of Multinational Enterprises Research Articles

External linkages and regional diversification in China: The role of foreign multinational enterprises

This article investigates the role of local external linkages in supporting regional industry entry in new activities, by specifically considering the role of foreign multinational enterprises (MNEs). Theoretically, we construct an original conceptual framework encompassing different potential trajectories of regional diversification based on the presence of MNEs. Empirically, we focus on the case of 279 Chinese prefectures over 1998–2007 and our results suggest that the presence of MNEs is associated with industry entry in unrelated and complex industries, supporting the idea that regional external linkages can activate processes of diversification that modify the technological and industrial portfolio of local economies.

Measuring economic activity in the presence of superstar MNEs

In 2015, changes to Irish tax legislation coincided with a 26% annual increase in real gross domestic product, driven by the presence of multinational enterprises (MNEs). We provide a method of statistically isolating variation in GDP growth attributable solely to domestic activity. Our findings imply a 21% lower level of GDP relative to the official measure recorded for 2020. We recommend our methodology to policymakers in economies where profit-shifting MNE activities introduce challenges to business cycle and fiscal monitoring.

The role of relatedness and strategic linkages between domestic and MNE sectors in regional branching and resilience

Despite the key role of multinational enterprises (MNEs) in both international markets and domestic economies, there is no consensus on their impact on their host economy. In particular, do MNEs stimulate new domestic firms through knowledge spillovers? Here, we look at the impact of MNEs on the entry and exit of domestic industries in Irish regions before, during, and after the 2008 Financial Crisis. Specifically, we are interested in whether the presence of MNEs in a region results in knowledge spillovers and the creation of new domestic industries in related sectors. To quantify how related an industry is to a region’s industry basket we propose two cohesion measures, weighted closeness and strategic closeness which capture direct linkages and dense inter-industry links between local industries respectively. We use a dataset of government-supported firms in Ireland (covering 90% of manufacturing and exporting) between 2006 and 2019. We find that domestic industries are both more likely to enter and less likely to leave a region if they are related to so-called ‘overlapping’ industries containing both domestic and MNE firms. In contrast, we find a negative impact on domestic entry and survival from cohesion to ‘exclusive MNE’ industries, suggesting that domestic firms are unable to ‘leap’ and thrive in MNE-proximate industries likely due to a technology or know-how gap. Finally, the type of cohesion matters. During the economic recovery (2015–2019), it is strategic rather than weighted closeness to overlapping industries that is associated with both domestic industry entry and survival.

Multinational Enterprises’ Dual Agency Role: Formal Institutions and Corporate Social Responsibility in Emerging Markets

This study systematically examines whether and how a nation’s extent of economic globalization, manifested by the presence of multinational enterprises (MNEs), and formal institutional development may jointly influence a nation’s overall corporate social responsibility (CSR) involvement across emerging markets. Drawing on institutional theory, we develop a dual agency model: on the one hand, MNEs take the role of CSR agents in demonstrating CSR practices and imposing direct influences on local firms in emerging markets; on the other hand, MNEs function as institutional agents, conducting activities of institutional entrepreneurship and channeling global institutional influences into emerging markets. Empirically, we conduct a bootstrapped test of mediation analysis across 83 developing countries. Our findings show that in the context of emerging markets, a more significant presence of MNEs in a nation positively links to its firms’ overall CSR involvement, and the nation’s formal institutional evolvement partially mediates such a positive relationship. This study ends with a conclusion and discussions on the contributions and implications.

The role of MNEs in regional smart specialisation strategies: evidence from San Luis Potosi, Mexico

Smart specialisation strategies have been adopted in Mexico to guide innovation policy towards strategic domains in particular regions. In San Luis Potosi, the presence of multinational enterprises (MNEs) in the automotive sector has fostered growth and shaped regional strategy. The sector is considered one of the three state priorities as an outcome of smart specialisation strategies. The article follows a case-study methodology based on secondary data as well as 16 interviews and 40 responses to a perception survey to shed light on the role of MNEs in regional innovation. The findings show that the presence of MNEs in the region has had productivity impacts but limited innovation impacts. A framework is suggested to guide policy action according to the MNE as well as regional characteristics. Moreover, the findings reveal the importance of facilitating related entrepreneurship.

Multinational enterprises are at the heart of the tension between sovereign control and liberalisation of the entry and establishment of foreign direct investment.

Multinational enterprises seem to grow in power; with their international system influence and their role in most of global economic activity and development; at the expense of state control and sovereignty. Such Multinational enterprises have benefited from the existence of international trade entities such as the WTO that calls for some level of lifting of trade barriers within its member states. One set of scholar work from anti- globalists argue that the presence of multinational enterprises is more detrimental than beneficial to state economies. However, recent evidence seems to state that foreign direct investment from such enterprises can help promote and sustain state development. Such pro globalists state that states that choose to limit, arbitrarily control or refuse to liberalise foreign direct investment or not offered such opportunity by the multinational enterprises are less developed. Such ideology has motivated a number of states to integrate their economies with the dynamics of multinational enterprises to have a medium to global economies and to encourage development.

How the presence of multinational enterprises impacts the human rights of workers in Mexico

How the presence of multinational enterprises impacts the human rights of workers in Mexico

Climbing the Rungs of the Quality Ladder: FDI and Domestic Exporters in Romania

Abstract This article argues that inflows of foreign direct investment can facilitate export upgrading in host countries. Using customs data merged with firm-level information for 2005–11, it shows a positive relationship between the quality of products exported by Romanian firms and the presence of multinational enterprises (MNEs) in the upstream (input-supplying) industries. Export quality is also positively related to MNE presence in the downstream (input-sourcing) industries and the same industry, but these relationships are less robust. These conclusions hold both when the product quality is proxied with unit values and when it is estimated following the approach of Khandelwal et al. (2013).

Foreign direct investment and wage spillover in Thailand

PurposeThe purpose of this paper is to investigate whether foreign direct investment (FDI) benefitted Thai workers in domestic firms.Design/methodology/approachBy utilizing existing firm-level unbalanced panel data from the survey of the Office of Industrial Economics, Ministry of Industry, Thailand, between 2004 and 2013, this study applies dynamic panel data analysis, using the generalized method of moments proposed by Arellano and Bond (1991), to estimate the wage spillover from multinational enterprises (MNEs) to domestic firms in Thailand.FindingsThe study reveals that there is a positive wage spillover from the presence of MNEs in the industry to domestic firms. Furthermore, a wage spillover also exists in the low-technology industry, as well as in firms located in the Metropolitan and Northern regions. These findings confirmed that FDI offers a significant advantage in Thailand’s labor market.Originality/valueThis study is the empirical research to utilize existing firm-level unbalanced panel data in Thailand, applying dynamic panel data analysis to data from 2004 to 2013 to estimate the wage spillover from MNEs to domestic firms.

How Domestic Firms Benefit from the Presence of Multinational Enterprises: Evidence from Indonesia and Philippines

Incentives are provided to attract multinational enterprises (MNEs) to host countries, with the expectation that their technology will spread to domestic firms. The purpose of this study is to examine how domestic firms benefit from the spillover of technology from MNEs. Using balanced panel data obtained from the World Bank Enterprise Survey, this study examined the impact of technology spillover through three channels: demonstration, competition, and worker mobility on productivity of domestic firms in Indonesia and Philippines. This study also explored the importance of domestic firms’ absorptive capacity in capturing benefits from the three spillover channels. The Cobb–Douglas production model was used as the basis for the estimation model. A fixed-effect model for panel data analysis was used to analyze the data. The empirical outcome of this study revealed that worker mobility is the most viable channel of spillover in the two countries. It also showed that firms with high absorptive capacity were found to benefit from all the channels of spillover in both countries, while the firms with low absorptive capacity benefit differently in the two countries. Thus, this study validates the need for domestic firms to develop absorptive capacity in order to benefit from the technology spillover from MNEs.

Climbing the Rungs of the Quality Ladder: FDI and Domestic Exporters in Romania

This paper argues that inflows of foreign direct investment can facilitate export upgrading in host countries. Using customs data merged with firm-level information for 2005-2011, it shows a positive relationship between the quality of products exported by Romanian firms and the presence of multinational enterprises (MNEs) in the upstream (input-supplying) industries. Export quality is also positively related to MNE presence in the downstream (input-sourcing) industries and the same industry, but these relationships are less robust. These conclusions hold both when the product quality is proxied with unit values and when it is estimated following the approach of Khandelwal et al. (2013).

Multinational enterprises or the quality of regional institutions – What drives the diffusion of global CSR certificates in a transition economy? Evidence from Vietnam

Abstract Central governments in transition economies often face difficulties enforcing labor and environmental regulations at the subnational level, and this is particularly the case in Vietnam. The diffusion of global corporate social responsibility (CSR) certificates, such as ISO standards, is seen as one possible solution to increase awareness and induce a change in the behavior of domestic firms. Against this background, this study examines whether the presence of multinational enterprises in certain regions or the quality of regional institutions and thus a friendly business climate is more conducive for implementing global CSR certificates. Based on a merged dataset covering 4500 private Vietnamese firms, we applied propensity score matching analysis and multilevel regression models in order to identify conducive conditions for global CSR certification implementation at the firm level. Our results show, first, that global CSR certificates have a negative impact on firms’ productivity growth. Second, regional institutions, especially CSR support systems with tax reductions, subsidies and consultations on environmental and labor standards, positively influence the spread of global CSR certificates among Vietnamese firms. Third, CSR support systems have a larger impact in the northern provinces where the business climate is more difficult for private local firms. We recommend that policy makers consider CSR support systems as a means to encourage firms to improve their environmental and labor standards. Future research can build upon our work, by conducting cross-country studies to test whether regional institutions matter for the implementation of global CSR certificates in other emerging economies.

Venture capital as an innovation ecosystem engineer in an emerging market

How can venture capital (VC) firms transform a weak innovation ecosystem into a productive and robust one? While the literature has found VC firms’ catalyst role in innovation in developed markets, we know little about whether and how they affect innovation in an emerging market, where formal institutions (e.g., regulations and markets) and informal institutions (e.g., professional networks) to enable VC firms’ catalyst role are relatively lacking. First, we argue that VC firms play a different and more proactive role in these markets as an “ecosystem engineer” through governing the resource flow and selecting deviation, which drive regional innovation performance. Second, such effects are further positively moderated by the presence of multinational enterprises (MNEs) in a region. Lastly, over time, while the direct effects of VC firms persist and increase, the moderating effects of MNE presence decline. Empirically, we examined a Chinese provincial-level panel data of VC activities (1999–2009) and patent applications (2000–2010) and found supportive evidence. Implications are discussed.

A critical literature review on the link between multinational enterprises presence, absorptive capacity and competitive advantage of firms

Scholars seem to agree on the importance of the local activity of foreign MNEs for country’s development, but opinions differ widely concerning their impact. As the government work out policies to improve Foreign Direct Investment, questions that need to be answered include how Multinational Enterprises affects the competitiveness of the local domestic enterprise. This paper presents a critical review of literature on the link between the presence of Multinational Enterprises, absorptive capacity and the competitiveness of domestic firms. A number of theories have been presented and empirical literature reviewed on the key constructs of the study. A conceptual model on the relationship was developed showing the link between MNEs presence, absorptive capacity and competitive advantage. Absorptive capacity was conceptualized as an intervening variable and was operationalised as research and development activities, internal and external organization of innovation and quality of human capital. This relationship was conceptualized as moderated by distance which was operationalised as culture, physical location and institutional difference. The competitiveness for the purpose of this study was conceptualized to mean productivity and innovation advantage. The reviewed literature confirms the fact that MNEs presence act as a source of knowledge which is transferred to domestic firms which in turn achieve competitive advantage. This transfer is made possible by the existence of the absorptive capacity among the firms. For that reason we emphasize that FDI related policy needs to be concerned not only with attracting MNEs, but also with securing effective benefits. In other words, policy makers must consider all factors that hinders knowledge transfer to the domestic firms like the absorptive capacity. The reviewed literature support the argument that the greater a firm’s exposure to knowledge sources, the greater the firm will acquire the competitive advantage. Like all research, the present study has limitations mainly the lack of primary data as it was more of a conceptual study.

Foreign Direct Investment, Financial Development and Economic Growth: A Panel Data Analysis

Using Generalized Method of Moments (GMM) panel data analysis to examine the relationship between Foreign Direct Investment (FDI), financial development and economic growth in a group of 70 developed and developing countries from 1988 to 2002, it is found that the impact of FDI on economic growth is ambiguous. FDI may either increase or decrease the growth rate of the economy, depending on the financial market development indicators used in the study. The findings, however, support the notion that a certain level of financial sector development is a significant prerequisite for FDI to have a positive effect on economic growth. Policy implications are clear that since it has been stated that the economic performance depends to some extent on the development of domestic financial sector, effort should be made to reform and improve the development of domestic financial and banking sector in order to benefit more from the presence of FDI. (ProQuest: ... denotes formulae omitted.) Introduction There are few channels through which Foreign Direct Investment (FDI) permanently affects the growth rate, depending on the different models of economic development. In Solow-type standard neoclassical growth models, FDI is traditionally viewed as a crucial source in increasing the capital stock of a country. According to this school of thought, there is no difference between domestic and foreign capital in affecting economic growth. Moreover, it is suggested that, with the assumption of diminishing returns to capital, the impact of FDI on growth is crucial in the short run, but not persistent in the long run (Barro and Sala-i-Martin, 1995). In endogenous growth models, the potential of FDI in influencing growth is greater. In the literature, the role of FDI in growth can be explored through production function. Different from Solow-growth model, foreign capital will influence the path of domestic capital significantly, that is, either crowd-in or crowd-out domestic investment. If foreign capital produces a crowdin effect on domestic capital (or the relationship is complementary), then the impact of FDI on growth will be larger. Furthermore, if the presence of FDI affects local capital differently, for example, by the way of expanding the variety of intermediate and capital goods, then it can lead to improvement in the productivity level of the recipient country (Borensztein et al., 1998). Besides, FDI also affects labor via job creation. The role of FDI, nevertheless, is more significant in transferring technology and know-how that are embodied in human capital. The effect of FDI would be limited if the recipient country does not meet the minimum threshold of the absorptive capacity in terms of human capital, technological skills and domestic financial development (De Mello, 1997; Levine, 1997; and Borensztein et al., 1998). Therefore, the presence of FDI inflows will entail crucial knowledge transfer in terms of training, skill acquisition, new management practices and organizational arrangements. All of these will contribute to a higher level of productivity and efficiency of human capital or labor, which will lead to a higher level of economic growth. In line with the findings, single-country studies for Australia (Caves, 1974), Canada (Globerman, 1979), and Mexico (Blomstrom and Persson, 1983) found that the presence of Multinational Enterprises (MNEs) had positive effects on local productivity. In contrast, studies for Morocco (Haddad and Harrison, 1993) and Venezuela (Aitken and Harrison, 1999) concluded that there was no evidence that MNEs had a positive effect on the productivity growth of local firms. In another study, Kholdy (1995) determined the causality relationship between FDI and spillover efficiency, as defined by higher labor productivity and capital formation, in Mexico, Brazil, Chile, Singapore and Zambia. However, he argued that there is no causality linkage between FDI and labor productivity in the countries under consideration. …

Multimarket contact and performance: Evidence from emerging economies

The organizational structure of multinational enterprises (MNEs) is mainly made up of subsidiaries located in emerging and advanced countries. Consequently, they usually compete against the same rivals simultaneously in both emerging and advanced contexts. Multimarket contact (MMC) theory analyzes the competitive dynamics that arise in these situations. However, researchers have paid more attention to the consequences of multimarket contact in developed countries than to its effect in emerging countries. To explore the impact of the macroenvironment on the relationship between MMC and performance, we examine how coinciding with multimarket rivals in emerging economies alters the effect of MMC on firm performance. Our research, which is developed with a sample from the mobile telecommunications industry, shows that the presence of MNEs in emerging countries hinders the development of mutual forbearance practices and, therefore, reduces the positive effect of MMC on firm performance.

Ownership and Energy Efficiency in Indonesian Manufacturing

Using 1996 and 2006 census data on medium-large plants in Indonesian manufacturing, we examine whether foreign multinational enterprises (MNEs) and stateowned enterprises (SOEs) used purchased energy more efficiently than local, private plants, finding that the correlation between plant ownership and total energy intensity, gas intensity, and coal intensity was generally weak in both years. Second, we ask whether energy efficiency in private plants was affected by the presence of MNEs or SOEs in high-energy-consuming industries. In 1996, private energy intensities were often positively correlated with the presence of SOEs and majorityforeign MNEs and negatively correlated with the presence of wholly foreign or minority-foreign MNEs, but in 2006 the corresponding results differed substantially. This suggests that ownership-related differentials in energy intensity and intra-industry energy-intensity spillovers are not pronounced. If policymakers are concerned with improving energy efficiency in Indonesian manufacturing, plant ownership should not be a major consideration.

When Multinationals Leave: A CGE Analysis of the Impact of Divestments

Abstract Most studies on Multinational Enterprises (MNEs) focus on the impact of their expansion through inward or outward foreign direct investment (FDI) flows. However, divestments are quite common among the operations of MNEs. In order to derive their effects, we build a computable general equilibrium (CGE) model that includes two non-standard characteristics: the presence of MNEs and unemployment. The model is applied to the Spanish economy, where FDI inflows have surpassed divestments at the aggregate level in the period 2005-2009, although divestments have been sizeable in ten sectors. We analyse two different scenarios: 1) divestments that involve the closure of plants of foreign affiliates and 2) divestments where national firms buy the plant of foreign affiliates. The model allows estimating the overall impact of the divestments occurring simultaneously in ten sectors and in particular sectors. Results not only show that national acquisitions are less harmful than closures, but quantify those effects, and provide information on the role of the divesting sector. Some adjustment costs arise in all scenarios.

Productivity Spillovers from Foreign Multinational Enterprises to Domestic Manufacturing Firms: To What Extent Does Spatial Proximity Matter?

Mariotti S., Mutinelli M., Nicolini M. and Piscitello L. Productivity spillovers from foreign multinational enterprises to domestic manufacturing firms: to what extent does spatial proximity matter?, Regional Studies. This paper analyses the role of spatial proximity in productivity spillovers from foreign multinational enterprises (MNEs). Using a database of foreign affiliates located in Italy from 1999 to 2005, it is shown that local firms benefit from the presence of MNEs through both backward and forward linkages. It is found that: (1) spillover effects are more strongly associated with MNEs in knowledge-intensive business services and utilities; and (2) co-location positively affects productivity spillovers, and the effect is stronger for foreign affiliates that are distantly located. This is especially true in the service sector due to the role of temporary spatial proximity and other dimensions of proximity.

Cultural Alienation in Today's Multinational Work Arenas: Behavioral Fallout from Globalization

The rapidly growing presence of multinational enterprises has brought forth a plethora of intra-organizational issues. Alienation is one such issue heard as a frequent refrain in business press reports and often describes the experience of employees who find themselves in mixed cultural work arenas. This is a condition of malaise associated mainly with feeling not integrated into the dominant culture of the organization.