Does foreign direct investment promote institutional development in Africa?

Foreign direct investment (FDI) inflows into Africa have increased since the turn of the millennium, mainly due to FDI growth into African countries by multinational enterprises (MNEs) from developing economies. While African governments view this growth as a positive development for the continent, many governments in the West have raised concerns regarding the institutional impact of investments from developing economies. This paper examines the impact of FDI flows on institutional quality in African countries by distinguishing investments from developed versus developing economies. Previous empirical studies have found a significant relationship between FDI flows and institutional quality in African countries but regard the relationship as MNEs rewarding African countries for adopting institutional reforms. However, little attention has been paid to the reverse causality, i.e. that FDI can cause an institutional change in African countries. Using bilateral greenfield FDI flows between 56 countries during 2003?2015, we find no significant FDI effect from developed and developing economies on institutional quality in host countries. However, aggregate FDI flows from developed and developing economies have a significant positive effect on host country institutional quality but differ concerning the impact's timing. In contrast, we find no significant effect of FDI flows from China on host country institutional quality. Our results are robust to alternative measures of institutional quality.     

Comparison of codes of conduct for multinational corporations

The conflict between increasing technical and economic integration and a resistance to political integration has led to tension between multinational enterprises (MNEs) and nation states. One result has been a growth in pressures to regulate MNEs, often through codes of conduct. This article compares five codes of conduct prepared by groups ranging from the OECD to the non-aligned countries.While substantial areas of agreement are found, important disagreements over the objectives and provisions of a code of conduct do emerge on a North-South or rich-poor axis. The most important disagreements involve resolution of investor-host government disutes and questions of national treatment of investors.Although the major disagreements between rich and poor countries will be difficult to resolve, the article posits that the process of code development per se is valuable as a means of facilitating the transmutation of symbolic into concrete differences. The development of a reasonably explicit code for regulation of MNEs requires that the parties concentrate on relatively narrow issues areas and permissible behavior rather than symbolism and ideology. While important, and perhaps even interactable problems remain, it is suggested that the process of code development is important, as the relatively concrete differences that result are at least potentially subject to resolution through rational negotiation. Symbolic differences obviously are not.The article also suggests a minimal scope of issue areas to be covered if a code is to be an effective instrument.     

Who Invests in the Least Developed Countries?

Abstract

Africa is a giant market with a population of Europe and Japan combined, and highly diversified with respect to culture, natural resources, economic development, and political regimes. Yet, the continent is largely ignored with respect to research on the multinational activities of U.S. firms. In this paper, we provide the first evidence regarding the operating characteristics of U.S. firms that operate in Africa. We find that firms with operations in Africa are larger, more diversified, and more profitable than a matched control sample of multinational firms. This paper also shows that technology firms, manufacturing firms, and mining firms dominate the rest of companies operating in Africa. Certain geographical regions in Africa also seem to attract more companies than others, with Southern Africa being the most preferred region, while Central Africa is the least preferred. Finally, when a multinational firm invests in a specific country in Africa, it tends to do so in several business sectors.     

Determinants of Russia's Informal Economy: The Impact of Corruption and Multinational Firms

Based on the electricity consumption approach, this study examined empirically (among other determinants) the impact of corruption and multinational firms (MNEs) on the relative size of the informal economy in Russia's regions in 1995–2012. Strong evidence is provided of the positive effect of corruption on the informal regional economies. The significant role of MNEs and regulation in curbing informal activities is revealed. A larger informal economic sector is observed in regions with a higher number of local firms and unemployment. An integrated strategy of dealing with corruption and informal businesses is suggested to be more effective in reducing informal practices.     

Corruption,South African Multinational Enterprises and Institutions in Africa

We examine the responses of South African multinational enterprises (MNEs) to corruption in African markets in the context of institutional voids. Corruption is a source of uncertainty and additional transactional costs for MNEs and it necessitates a strategic response. The research employs a qualitative study of a sample of MNEs with experience in internationalising into Africa. The results indicate that corruption in African markets is pervasive and closely associated with the institutional voids in these countries. MNEs see themselves as ‘institution takers’ responding to countries’ institutional makeup at the organisational and individual level but fail to fully appreciate their impact on institutions both positively and negatively. Rather MNEs focus on strategic responses at the organisational level to address corruption operationally in the host country. We add to the existing literature by providing a dynamic framework of the complex webs of association between institutions, MNEs and corruption in conditions of economic underdevelopment. The research suggests that MNEs do not need to get caught in a vicious cycle whereby they perpetuate corruption in conditions of underdevelopment and institutional voids but instead can contribute towards a virtuous cycle through which they institutionalise ethical foundations.     

The political economy of tourism in North Africa: Comparative perspectives

Tourism has become a salient sector in the economic‐development strategies of North Africa, despite the fact that the states of the region have met with varying degrees of success in their attempts to expand and develop their tourism sectors. This article adopts a political‐economy approach to the analysis of tourism in North Africa. Its aims are to highlight the main aspects of the region's political economy that have influenced outcomes in the tourism sector of each country, and then to explain the political dynamics that underlie the tourism sectors of the region. This article asserts that all North African states now have embraced tourism—albeit with varying amounts of enthusiasm—as a key economic industry. It examines the relationship between tourism and economic reform in the region, followed by the political dynamics of the sector, arguing that tourism is a very political affair, but for reasons different than in other sectors of the economy. It concludes with some observations on the strategic and developmental challenges that confront the development of tourism in North Africa. © 2000 John Wiley & Sons, Inc.     

Russian MNEs Under Sanctions: Challenges for Upgrading in GVCs (Cases of Energy and IT Industries)

Abstract

The article examines upgrading strategies of Russian multinational enterprises (MNEs) under sanctions. We focus on MNEs from energy and information technology industries. Four types of global value chain (GVC) upgrading strategies (process, product, functional, and chain upgrading) are discussed. The paper is based on the case study research. The research questions address the influence of sanctions on Russian MNEs’ upgrading strategies in GVCs and the role of import substitution policies for companies’ upgrading. Research findings show that at microlevel, sanctions do not prevent implementation of upgrading strategies. Import substitution policies provide additional support for MNEs upgrading in GVCs.     

The Impact of “Consumer Cringe” on Developing Regional Trade Blocks

Abstract

The continuing development of regional trade blocs, such as COMESA (The Common Market for Eastern and Southern Africa), ECOWAS (The Economic Community of Western African States) and the resurgence of a new EAC (East African Co-operation), will depend significantly on consumer confidence in products from within the region. Ninety-six Commerce undergraduates from Tanzania estimated the preference patterns, among relevant home market segments, for a range of consumer goods produced in Tanzania, East Africa, and the West. For each comparison, the three goods were described as identical in terms of the “4 Ps” (Product, Promotion, Price, and Place). Tanzanian consumers were consistently reported to prefer Western foreign goods over equivalent regional imports, with home-produced goods faring least well of all. Such “consumer cringe” (which has also been identified in West Africa and South America) suggests that at least in terms of the East African Co-operation (EAC), regionally-produced goods can indeed be relatively attractive, provided a bias in favor of Western goods can be addressed by appropriate marketing initiatives.     

Transmission of Rice Prices from Thailand into West African Markets: The Case of Benin,Mali, and Senegal

ABSTRACT

The integration of West African rice market to the world market is assessed in order to derive the implication for food security. To this end, the transmission of rice price changes on the world market to selected markets in West Africa was examined to test for the presence of transaction costs. Using the two-regime threshold cointegration procedure on monthly price data, evidence in support of the hypothesis of asymmetric price transmission was found between Thailand and some West African markets. Price increases on the world market were more quickly transmitted to domestic price than were price decreases in Benin and Mali, suggesting short-run dynamic inefficiencies and the presence of transaction costs. In Senegal, the adjustment was linear, suggesting greater integration with the world rice market. The results suggest that West African governments should design and implement adequate policies to develop the domestic rice sector, improve market infrastructures in order to reduce their country dependency to international markets and ensure food security.     

Multinationals in the Middle East: Challenges and opportunities

This introduction to the special issue on Multinationals in the Middle East first reviews the historical growth and development of multinational enterprises (MNEs) in the territory extending from Morocco to Turkey alongside the southern and eastern shores of the Mediterranean as far east as Iran, and south to Sudan and Yemen. Then, several opportunities and challenges affecting MNEs in the region are discussed, including economic and social diversity, non-market strategies and entry-mode choices, and animosity toward MNEs. The seven papers featured in the special issue that address these topics are then discussed.     

区域性超国家组织及其诸种形式辨析

区域性超国家组织大量形成是当代社会政治结构演化过程中出现的一种新形式,它主要是国家政府间的集团组织。规模较大的组织有欧洲联盟、非洲联盟、美洲国家组织、东南亚国家联盟、上海合作组织、独立国家联合体等。这种超国家机构多是在经济全球化过程中跨国家、跨地区的经济共同体或经济协作组织大规模迅速发展而导致政治合作的产物。这些组织类型不同,功能各异,有的政治功能强,有的经济功能强,有的属军事合作,有的是洲际性的,有的则是区域性的,但影响远非局限于某一区域。各种各样的超国家组织正处在发展演化过程中。     

Joint Ventures in Russia

There is an extensive literature on the role of joint ventures in international business. Most of this has focused on the involvement of multinational enterprises (MNEs) in establishing joint ventures in developing countries. Recent political and economic reforms in Eastern Europe have focused attention on joint venture opportunities in ex-centrally planned economies, including opportunities for small and medium-sized enterprises. This paper examines the experiences of two small, family owned Scottish companies in establishing joint ventures in the largest of the East European countries, the Russian Federation. The cases highlight the important strategic and managerial issues involved in planning, negotiating and implementing joint ventures with Russian partners. Sensitivity to the business development needs of the host organization, the establishment of good personal relationships and flexibility are crucial to the joint venture process.     

Does intellectual property rights reform spur industrial development?

An extensive theoretical literature generates ambiguous predictions concerning the effects of intellectual property rights (IPR) reform on industrial development. The impact depends on whether multinational enterprises (MNEs) expand production in reforming countries and the extent of decline in imitative activity. We examine the responses of U.S.-based MNEs and domestic industrial production to a set of intellectual property rights reforms in the 1980s and 1990s. Following reform, MNEs expand the scale of their activities. MNEs that make extensive use of intellectual property disproportionately increase their use of inputs. There is an overall expansion of industrial activity after reform, and highly disaggregated trade data indicate higher exports of new goods. These results suggest that the expansion of multinational activity more than offsets any decline in imitative activity.     

The role of MNEs’ internationalization patterns in their regional integration of FDI locations

Multinational enterprises (MNEs) use the regional aggregation and integration of their foreign direct investments as an important part of their internationalization. Internationalization decisions are integrated at the region level; however, little work has focused on explaining the extent of this regional integration. We develop theoretical arguments and test new hypotheses about MNEs’ general international experience and international geographic scope (i.e., institutional diversity and international dispersion) as predictors of their extent of regional integration. The results from a sample of Japanese MNEs validate these different effects, suggesting these MNE level variables are important for regional influences on their internationalization decisions. The results further our understanding of how MNEs organize their internationalization and strategic geographic foci.     

Service multinational enterprises and linkages development in Pakistan

The development of various types of linkages is key to understanding the impact of multinational enterprises (MNEs) on the economic development of host markets. Using a qualitative research approach, we investigate the linkages created by IT MNEs in Pakistan. The findings suggest that these MNEs have created management, technological, diversification, and financial linkages, among others. Their creation is contingent and co‐determined by the MNEs' investment motives, their mandates, and embeddedness in the host market as well as the local technical capability. We highlight the contributions and implications of these linkages. Copyright © 2017 ASAC. Published by John Wiley & Sons, Ltd.     

Entering the last frontier: expansion by US multinationals to Africa

Literature on multinationalism, even that which focuses on economic development and incentives for foreign direct investment (FDI), largely ignores the African continent despite its market of over 700 million inhabitants and its unique challenges for foreign firms. However, the African continent provides an important arena for examining the effects of infrastructure, wealth, and political differentials across countries and the effects of these variables on the expansion decisions of US multinational corporations (MNCs). In this paper we examine the US stock market reaction to announcements of US firms entering African markets through both FDI and Non-FDI modes. Finally, we investigate the accounting performance implications of these expansions. Our results show that, on average, firms experience negative wealth effects when expanding to Africa. Further analysis shows that expansions to South Africa produce losses, while expansion to the rest of Africa produce positive gains. We also show that firms with higher return on equity perform better than firms with lower return on equity when they expand to Africa in countries other than South Africa.     

The dynamic role of small- and medium-sized multinationals in global production networks: Norwegian maritime firms in the Greater Shanghai Region in China

This article examines the role of small- and medium-sized multinational enterprises (MNEs) in the dynamic development of global production networks (GPNs) in the maritime industry. It studies the dynamism between subsidiaries of Norwegian maritime firms and regional actors and institutions in the Greater Shanghai Region of China from the perspectives of the subsidiaries. It argues that strategic coupling, recoupling and decoupling are partly the results of regional selection mechanisms. However, in the cases where the subsidiaries are embedded within the host region, the strategies and behaviour of MNEs are of decisive importance for the dynamic development of GPNs.     

Clustering,MNEs, and Innovation: Who Benefits and How?

Abstract

This paper explores three under-researched questions in the literature on multinational enterprises (MNEs), clustering, and innovation. First, to what extent does multinationality lead to higher rates of innovation activity and performance? Second, what, if any, is the link between MNE cluster location and innovation inputs and outputs? Third, are there any significant differences between enterprises belonging to domestic and overseas MNEs in these regards? Evidence is based primarily on 11,775 firms derived from the UK Community Innovation Survey 2007. Diversity in the regional economy exerts the most consistent positive influence, followed by the scale of employment in the enterprise’s own industry. Enterprises belonging to domestic MNEs appear to exert higher levels of innovation effort. However, evidence regarding their superiority in innovation outputs was weaker. Contrary to Michael Porter’s work, it appears that enterprises belonging to overseas firms benefit more than domestic firms.     

The Impact of Foreign Direct Investments (FDIs) from Market Economies to Centrally Planned Countries

Despite the recent economic slump and subsequent reductions and fluctuations of investment ­activities undertaken by multinational enterprises (MNEs) in host markets, the overall volume of foreign direct investment (FDI) has significantly grown over the past three decades. The major proportion of the FDI flows from market economies to centrally planned countries, with the latter currently receiving huge amounts of inward FDI from the West. A representative example of this flow is China. China is often referred to as the factory of the world and/or the black hole of inward FDI. © 2016 Wiley Periodicals, Inc.     

Domestic Credit and Export Diversification: Africa from a Global Perspective

ABSTRACT

As open economies, African countries need to diversify their exports for economic transformation, sustained growth, and development. Meanwhile, there has been increasing importance of development financing. Following the discussion of theoretical issues on the importance of domestic credit as a potential instrument for overcoming the liquidity constraint of developing countries, as in the case of Africa, this paper empirically explores the determinants of export diversification, with particular attention to domestic credit. The estimation is based on a five-year panel regression analysis for the 1962–2010 period involving 80 countries around the world, of which 62 are developing and 29 African countries, using as covariates variables traditionally viewed as affecting export diversification. System GMM estimates provide robust evidence supporting the importance of domestic credit for African countries, while its role in other countries seems rather marginal. In addition, human capital in the form of schooling, governance as measured by constraint on the chief executive of government, and being land-locked, all exert significant effects, as anticipated, on export diversification among African countries. However, except for governance, appropriately controlling for the interactive effect of domestic credit with ‘Africa’ yields generally insignificant impacts of these variables, together with domestic credit, on export diversification in non-African countries. These results point to the dominant role of domestic credit in Africa vis-à-vis other countries globally.