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Pawan S. Budhwar and Kamel Mellahi
Edited by Pawan S. Budhwar and Kamel Mellahi
Asian Countries, especially China, have in recent years enjoyed high rates of economic growth, offering unparalleled opportunities for investors and traders from both inside and outside the region. While there are moves towards Asian economic integration, barriers must be overcome: witness maritime disputes in the South China Sea, differing levels of development, and deficient domestic institutional structures, which inhibit advanced economic cooperation. Additionally, a number of regional integrative bodies with overlapping jurisdictions and responsibilities impede effective decision making. The region also suffers from inadequate physical infrastructure, although the Chinese leaders have been proactive in promoting the intra- and inter-regional One Belt One Road (BRI) and the Asian Infrastructure Investment Bank (AIIB) initiatives. This is the general context within which the following chapters relating to multinational corporations (MNCs) may be understood. Key words: economic integration, foreign direct investment (FDI), connectivity, One Belt One Road (BRI), Asian Infrastructure Investment Bank (AIIB).
The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation
Kaname Akamatsu set forth the flying-geese theory of economic development as back as the 1930s, drawing on his statistical studies of Japan’s trade in manufactures in 1870_1939. He considered essential the old-fashioned, highly nationalistic, infant-industry protection strategy, a strategy that was designed to propel the three-step sequence of import, domestic production, and export, all by indigenous firms in avoidance of incursions by foreign interests. Arm’s-length trade was the major mode of exchange. Since then, however, the world economy has drastically changed. Multinational corporations (MNCs) are now ubiquitous, setting up production and marketing facilities in each other’s economies. The three-step sequence is carried out instantaneously at the hands of MNCs: local production is initiated simultaneously for export as well as for import substitution. MNCs’ involvement in the three-step sequence is explored.