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Extending the Eclectic Paradigm in International Business

Essays in Honor of John Dunning

Edited by H. Peter Gray

John Dunning is undoubtedly the world’s leading scholar on the subject of multinational corporations and international business. This collection of original essays is designed to honor this work, particularly his achievements during his association with Rutgers University.
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Chapter 12: Asynchronous Political and Economic Development and the Asian Financial Crisis: A Preliminary Analysis

Michael A. Santoro and Changsu Kim


12. Asynchronous political and economic development and the Asian financial crisis: a preliminary analysis Michael A. Santoro and Changsu Kim1 INTRODUCTION: TOWARD A BETTER PREDICTOR OF FINANCIAL CRISIS. In the course of his distinguished career, our colleague, mentor, and friend John H. Dunning, left an indelible mark on virtually every aspect of international business studies. The subject of this chapter – the relationship between economic and political development and risk – is no exception to this rule. In his 1993 Geary Lecture to the Economic and Social Research Institute in Dublin, Professor Dunning offered the prescient observation that ‘just like the emerging managerial structure of the twenty-first century firms, we need governments to be lean, flexible and anticipatory of change. The new paradigm of government should eschew such negative or emotive sounding words such as “command”, “intervention”, “regulation”, and replace them with words such as “empower”, “steer”, “co-operative”, “coordination” and “systemic”’ (Dunning, 1993b). As the twenty-first century begins, Professor Dunning’s vision of soft government oversight of the economy is still markedly ahead its time, particularly among the developing nations of East Asia. Indeed, as we argue below, the heavy-handed direction of economic resources was one of the factors contributing to the financial crises besetting East Asia in 1997. For private investors, the biggest shock of the financial crisis derived from the inability of the debt and equity markets to anticipate the crisis. Indeed, foreign capital continued to flow into East Asia as usual until just before the crisis...

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