International Institutions and Multinational Enterprises

International Institutions and Multinational Enterprises

Global Players – Global Markets

International Institutions and Global Governance series

Edited by John-ren Chen

This book provides rigorous analysis of the wide range of questions surrounding the role of international institutions in governing global business, especially multinational enterprises (MNEs). The analysis, both theoretical and empirical, focuses on the corporate governance of MNEs and to what extent their management takes into account the negative effects of their activities. Also discussed are: how nation states and international institutions control the activities of MNEs, and how the role and strategies of international institutions can be changed to minimise any negative effects without hampering the positive aspects and effects of MNEs.

Chapter 6: Multinational Enterprises

Matthias Busse

Subjects: economics and finance, international economics


, core labour standards and the role of international institutions Matthias Busse INTRODUCTION The enormous growth of foreign direct investment (FDI), or the rise of multinational enterprises’ (MNEs) activities across countries, is one of the most important signs of the increasing globalisation of the world economy over the past decade. For instance, whereas world production has grown by an annual average of 1.5 per cent in the period 1990 to 2001, trade has risen by 6 per cent and foreign direct investment by 23 per cent (UNCTAD, 2002). While most international investments take place within the Triad, Japan, the European Union and the United States, which make up three-quarters of global FDI inflows and some 85 per cent of outflows in that period, FDI flows to developing countries are relatively small. In the same period, the 49 leastdeveloped countries1 attracted less than 1 per cent of FDI inflows. Yet the ratio of FDI inflows to GDP in these countries amounted to 2.2 per cent in this period, while the world average was 1.9 per cent, signifying a higher relevance of FDI to least-developed countries. While the pertinent literature is quite clear on the economic benefits of FDI inflows to the host country, since FDI, among other factors, is likely to increase the capital stock of the host country and to introduce new technologies and management systems,2 there are concerns that the global competition to attract FDI could lead to undesirable outcomes. In particular, fears...

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