Multinationals and Emerging Economies

Multinationals and Emerging Economies

The Quest for Innovation and Sustainability

Innovation, Co-operation and Development series

Edited by Wilfred Dolfsma, Geert Duysters and Ionara Costa

The global economy is changing rapidly and multinational corporations (MNCs) are at the forefront of this transformation. This book provides novel and profound analyses of how MNCs and emerging economies are related, and how this relationship affects the dynamics of the global economy. In particular, the authors deal with the nexus between multinationals, emerging economies and innovation from a variety of different perspectives. Innovation is regarded as a core driving force in the global economy but the authors show how it can impede as well as encourage sustainability. The book brings together insights from business studies and economics, and combines concise theoretical discussion with empirical analyses of unique data.

Chapter 6: Cross-border Investment and Economic Integration: The Case of Guangdong Province and Hong Kong SAR

Naubahar Sharif and Can Huang

Subjects: business and management, international business, organisational innovation, economics and finance, economics of innovation, international business, innovation and technology, economics of innovation, organisational innovation

Extract

Naubahar Sharif and Can Huang INTRODUCTION Globalization ‒ the integration of national economies into a global system ‒ entails, in part, the transfer of manufacturing sectors from the developed world to developing countries. As Feenstra (1998) indicates, measured by the merchandise trade relative to value added, the world is much more integrated than in the past. However, this ongoing global integration of industrial and trade activities brings with it the disintegration of production or business processes whereby, to increase profits, multinationals seek to outsource or directly invest either domestically or abroad. The overseas relocation of manufacturing and services spurs controversy and debate, not only in the advanced countries from which the manufacturing sectors move but also in the developing countries that receive them via foreign direct investment (FDI). Leaders of advanced countries face political opposition to the unemployment that results from the offshoring activities of their home-based multinationals (Rodrik, 1997; Schultze, 2004). For their part, observers in FDI-recipient countries are concerned about the potentially negative effects of the domination of the manufacturing sector by foreign-owned companies. Local firms in recipient countries must weather fierce competition from their foreign counterparts and face difficulties in upgrading their technological competence from the low end of the global value chain. Motivated by intense debate about these issues, this chapter undertakes a comparative study of the performance of local and foreign competitors’ manufacturing firms in one such FDI-recipient region ‒ Guangdong Province, China ‒ and analyses the policy implications of the comparison for the advanced, FDI-outflow region ‒ Hong Kong...

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