Table of Contents

Governance, Multinationals and Growth

Governance, Multinationals and Growth

New Horizons in International Business series

Edited by Lorraine Eden and Wendy Dobson

In Governance, Multinationals and Growth, leading scholars celebrate and build upon the pioneering work of Edward Safarian on multinational enterprises and foreign direct investment. The book explores the linkages among multinationals and foreign direct investment, corporate and public governance, and economic growth. The contributors pay particular attention to emerging policy issues that include the behavior of individual governments, intergovernmental organizations and civil society. In addition, they address linkages among MNEs, their governance and economic growth, and generic policy realities (and innovations) in a small-to-medium-sized economy.

Chapter 6: Foreign Ownership and Total Factor Productivity

Someshwar Rao and Jianmin Tang

Subjects: business and management, international business, economics and finance, international economics


* Someshwar Rao and Jianmin Tang INTRODUCTION Multinational enterprises (MNEs) are playing an increasingly dominant role in the world economy. Activities of MNEs increased at a considerably faster pace than world GDP in the 1990s (Figure 6.1). Total global inward foreign direct investment (FDI) stock increased from about US$800 billion in 1982 to over US$7 trillion in 2002. Sales and exports of foreign affiliates in 2002 were over US$20 trillion, compared to just over US$3 trillion in 1982. Currently over 50 000 MNEs, with more than 300 000 foreign affiliates, are operating in every corner of the globe. They employ over 50 million people all over the world. About 90 per cent of MNEs are from developed countries, but the share of emerging economies has been rising steadily. For instance, the share of emerging economies in global outward direct investment stock increased from 4.3 per cent in 1985 to 9.8 per cent in 2000. The activities of MNEs, however, are highly concentrated. For instance, the top 100 global MNEs account for between 10 to 15 per cent of the total sales, assets, exports and employment of all MNEs in host countries. In both developed and developing countries, the importance of FDI has increased steadily over the last two decades. Exports of foreign affiliates account for close to 35 per cent of world exports of goods and non-factor services. The ratio of inward FDI stock to GDP of developed countries increased from 4.9 per cent...

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