Skip to main content
Disciplines
Automotive Business IT + Informatics Construction + Real Estate Electrical Engineering + Electronics Energy + Sustainability Insurance + Risk Finance + Banking Management + Leadership Marketing + Sales Mechanical Engineering + Materials
Events
DE
EN
Books
Journals
Topic Page
Marketing
Start single access now
Access for companies
EXTENDED SEARCH
Log in
Top

1996 | Book

Introduction: Foreign Direct Investment in a Changing World Read chapter Read first chapter

Foreign Direct Investment in a Changing Global Political Economy

Editor: Steve Chan

Publisher: Palgrave Macmillan UK

Book Series : International Political Economy Series

Included in: Professional Book Archive

Login to get access
insite
SEARCH

About this book

This book examines foreign direct investment in a changing world economy. It offers case-studies of this investment in different national and industrial contexts. Firms and countries have encountered mixed results in using this investment to further their foreign leverage. Conversely, potential host countries have faced different opportunities and constraints in attracting or utilizing foreign capital for their development. Although some countries have been relatively successful, most do not appear to be well positioned to take advantage of the ongoing processes of globalization of national economies.

Table of Contents

Frontmatter
1. Introduction: Foreign Direct Investment in a Changing World
Abstract
After a brief decline during the early 1980s, foreign direct investment (FDI) has increased dramatically. During 1986–90, the amount of global FDI grew at an annual rate of 24 per cent, rising from US$78 to US$184 billion (United Nations, 1992, p. 14). In 1990, the developed countries received 83 per cent of this amount, with Western Europe (54 per cent) and North America (23 per cent) absorbing the largest shares (the amount of FDI received by Japan was relatively small, constituting only about 1 per cent of the global total). These figures point to the dense networks of cross-holdings of production and financial assets among the industrialized countries of the world.
Steve Chan
2. Auto Bargaining in Canada, 1965–87
Abstract
The US-Canada Auto Pact of 1965 created not only a North American market for automotive production and sales but a North American market for automotive investment as well. For the first time, bidding for investment between US states and Canadian provinces was possible. In this new environment, the bargaining power of the Canadian government fell relative to that of Ford and General Motors (GM) because of the new cross-border mobility of production and investment competition among states and provinces. This is indicated by the cost the Canadian federal and provincial governments incurred for automotive investments, as measured by investment incentives given to the automakers. No incentives were provided for the Auto Pact-era plants built in the 1960s; in the late 1970s, Canadian governments gave Ford 12.8 per cent of the value of its investment for an engine plant in Ontario and were prepared to give 15 per cent for a GM parts plant in Quebec which was ultimately not built. In the mid-1980s, the Canadians gave 17 per cent of the capital cost of the GM/Suzuki joint venture in Ontario and provided 43.8 per cent of the cost for GM to modernize its assembly plant in Ste.-Therese, Quebec. These worsening outcomes took place despite the decreasing concentration of the industry (a factor which should favor the host) and without such firm-favoring developments as acquisition of new allies in the host country or new technology beyond the reach of the host government (both more relevant with less developed host countries).
Kenneth P. Thomas
3. Maquiladorization as a Global Process
Abstract
A maquiladora is an assembly plant set up under the Border Industrialization Program instituted by the Mexican government in 1965 to provide employment for Mexican citizens in the cities along the U.S. border. An immediate reason for the government’s action was the termination of the bracero (guest worker) program by the United States that left many Mexican workers idle in these cities. The new program allowed duty free importation into Mexico of production equipment and materials and allowed 100 per cent foreign ownership of maquiladoras’ (Mobley, 1990, p. x). The United States supported the Mexican border policy by adopting legislation in the 1960s to introduce items 806.30 and 807.00 of the Tariff Schedules of the United States.2 These special trade provisions permit importation of products assembled abroad in export processing zones with the appropriate tariffs applied only to the added value associated with assembly (and not the total value of the products).
Jeffrey A. Hart
4. Japanese Foreign Direct Investment in East Asia: The Expanding Division of Labor and the Future of Regionalism
Abstract
This chapter shows that Japanese multinational corporations (MNCs) in concert with key ministries and agencies of the Japanese government are, attendant to the pursuit of their larger economic objectives, systematically promoting expansion of an East Asian division of labor and integration of regional production on a sector-by-sector basis. It also shows that Japanese foreign direct investment (FDI) is central to this process. The chapter begins with some brief comments on regionalism and globalisam in the changing world political economy and a short analysis of Japan’s global and regional FDI patterns to date and their future prospects. These are followed by an elaboration and explanation of Japanese official and corporate strategies and policies in promotion of regional integration and an assessment of their progress to date. Finally, the chapter assesses some of the likely consequences of the trends analyzed, particularly for other regional actors. It concludes that Japanese FDI is central to accelerating regional economic integration, but not of an exclusive kind; that Japanese celebration of the idea of expanding the regional division of labor, translated into an ideology of ‘cooperation,’ cannot serve as the basis for a widely acceptable regionalism; and that, in any case, the enormous asymmetry of economic power between Japan and its neighbors is a serious problem for the advance of a durable regionalism.
Kit G. Machado
5. Industrial Upgrading and Multinational Corporations: A Bumpy Runway for Taiwan’s Aircraft Industry
Abstract
Rapid economic growth in the East Asian newly-industrializing countries (NICs) is often referred to as a model for the developing world. These NICs, however, are facing the dilemmas of their past successes from an export-oriented strategy (see, for example, Bello and Rosenfeld, 1990). These problems include the rapidly eroding traditional factor endowment (i.e., abundant cheap labor) compared to the second-tier NICs such as Thailand and the People’s Republic of China (PRC), fierce competition among the NICs themselves, as well as rising protectionism of the industrialized countries where the NICs sell most of their products. In order to maintain and enhance their international competitiveness, they have been anxiously searching for and trying to create ‘new forms of competitive advantage’ (Simon, 1992).
Chi Huang
6. MNCs and Developmentalism: Domestic Structures as an Explanation for East Asian Dynamism
Abstract
The nature of the relationship between multinational corporations (MNCs) and developing countries and the implications of this relationship for economic growth remain highly controversial in the study of international political economy (IPE). For several decades, the debate occurred primarily in a dialogue of the deaf between modernization theory (which saw MNCs as promoting growth in the periphery) and dependency theory (which argued that MNCs prevented or distorted growth). More recently, statist theory has tried to resolve this conundrum by ‘bringing the state back in.’ In particular, this approach argues that ‘strong and autonomous’ states can regulate MNCs, thereby making them contribute to national economic performance.
Cal Clark, Steve Chan
7. State or Market: The Development of the Ecuadorian Banana Industry
Abstract
An extensive literature surrounds the question of the relationship between multinational corporations (MNCs) and economic development. East Asia is frequently cited as an example of a decidedly positive relationship between MNCs and economic development. In contrast, case studies drawn from the Latin American region tend to emphasize the negative consequences for economic development. Even within Latin America, however, the pattern is far from uniform, with some countries evidencing strongly positive outcomes from MNC investments. Most of this literature interprets the varying consequences of MNCs for economic development in terms of factors related to the market, and to the role of the state.
David W. Schodt
8. Foreign Direct Investment in Eastern Europe: Harnessing FDI to the Transition from Plan to Market
Abstract
As the drama in the East continues to unfold, the situation calls for continuing assessment and reassessment. The dust has not settled from the major upheavals of the turn of the decade, but some of the contours of the new landscape are beginning to be discernible. In any appraisal of the still-emerging role of foreign direct investment (FDI) in the Eastern economies, it is important to distinguish the potential from the actual. This chapter will first set forth the rationale for FDI, as an important element in the transition from planned to market economy, that is specific to Eastern Europe in the 1990s. It will then use this as a framework for analyzing — in a necessarily preliminary way — the actual role of FDI in the first four years of the decade.
Carl H. McMillan
9. Foreign Direct Investment in Ghana and Côte d’Ivoire
Abstract
This chapter seeks to understand the determinants of foreign direct investment (FDI) flows to developing countries, with specific reference to Ghana and Côte d’Ivoire. The beginning assumption is that in the present global political and economic climate, developing countries wish to attract FDI. It is therefore important to policymakers in developing countries to identify the demand-side determinants of FDI over which they may have some control (Tsai, 1991, p. 282).
Susan McMillan
10. Do MNCs Matter for National Development? Contrasting East Asia and Latin America
Abstract
Multinational corporations (MNCs) play a pivotal role in the cross-national flow of goods, capital, and technology (Gilpin, 1987, 1975; Vernon, 1977, 1971, 1966). As such, they are a key part of the evolving international political economy characterized by rising globalization of production processes, interpenetration of national product markets, interlocking holding of financial assets, and diffusion of manufacturing technology. Foreign direct investment (FDI) by these firms has recently gained further importance as many developing countries, beset by the debt crisis of the 1980s, have begun to seek this investment as an alternative source of external finance. The turn toward market economics by the former socialist countries and their reinsertion into the capitalist world economy have also increased the salience of FDI. This salience has moreover been accentuated by the declining amount of foreign assistance provided by the United States and Russia to many developing countries. Finally, because intrafirm trade among the majority-owned subsidiaries of MNCs has constituted a major source of surplus or deficit in international trade, FDI has become a new focus for analyzing the industrial competitiveness and commercial rivalry among developed countries such as the United States and Japan (Encarnation, 1992).
Steve Chan, Cal Clark
11. Investment Dependence and Political Conflict in Developing Countries: A Comparative Regional Analysis
Abstract
This chapter investigates the relationship between the multinational corporate penetration of developing countries and their levels of domestic political conflict.1 Political conflict is defined as action by non-governmental actors that is designed to change either the government or its policy. Research by Rummel (1966) and Tanter (1966) shows that political conflict may be separated into two dimensions, turmoil and internal war, with the former consisting of spontaneous, poorly organized, and violent conflicts and the latter including highly organized and extremely violent attempts to remove the government. Gurr and Lichbach (1986) describe a third type of conflict — protest — that is non-violent, well organized, and focuses exclusively on changing government policy. Hibbs (1973) shows that these forms of conflict are both empirically distinct and a product of different social forces.
John M. Rothgeb
Backmatter
Metadata
Title
Foreign Direct Investment in a Changing Global Political Economy
Editor
Steve Chan
Copyright Year
1996
Publisher
Palgrave Macmillan UK
Electronic ISBN
978-1-349-14121-0
Print ISBN
978-0-333-66476-6
DOI
https://doi.org/10.1007/978-1-349-14121-0