Table of Contents

The Economics of East Asian Integration

The Economics of East Asian Integration

A Comprehensive Introduction to Regional Issues

Edited by Masahisa Fujita, Ikuo Kuroiwa and Satoru Kumagai

This study is intended to be the most comprehensive textbook on economic integration in East Asia. It introduces the reader to various issues related to the topic such as institutional building of FTAs; production networks and the location choice of MNEs; R & D and innovation; infrastructure development and transport costs; international migration and service trade; monetary integration; regional disparity and poverty. It also deals with critical energy, environmental and agricultural concerns. Each chapter contains ample data and rigorous analyses, complemented by illustrative box articles.

Chapter 5: Theories on FDI and the Behavior of MNEs in East Asia

Ho Yeon Kim and Toshitaka Gokan

Subjects: asian studies, asian economics, asian urban and regional studies, development studies, development economics, economics and finance, asian economics, development economics, regional economics, urban and regional studies, regional economics

Extract

Ho Yeon Kim and Toshitaka Gokan The expanding role of foreign direct investment (FDI) in global economic development is now widely recognized. FDI emanates from location decisions of multinational enterprises (MNE) that roam across national borders to maximize their profits. Multinational production, investment and trade are becoming ever more important. As Markusen and Venables (1999) point out, the general view in the 1970s was that multinational investment was detrimental to the welfare of host economies, creating monopoly situations. In the 1990s, however, views became much more optimistic, suggesting that multinationals may stimulate development in host economies. Indeed, FDI represents the cutting edge of globalization; it conjoins a unique bundle of capital and managerial/technological knowledge. These optimistic views are supported by the strong evidence in East Asian countries. Hong Kong, Korea, Singapore, and Taiwan all fostered export-oriented production activities which were related with MNEs, and domestic enterprises in those countries have grown to become MNEs. Korean MNEs in particular have spread not only in East Asia but also into other regions. Given these optimistic views, then, governments in potential host countries may have an interest in how MNEs choose their production sites. In this chapter, we examine the positive and negative roles MNEs play in host countries. Our survey of related theories is complemented by a discussion of location choices of MNEs in East Asia, with a review of the path to prosperity taken by Korea as a typical example of the phenomenon we mentioned above, and a survey of representative...

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