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Feng Wei and Jacques Jaussaud

Emerging Chinese MNCs have rapidly expanded their network of subsidiaries both in the developed and in developing countries over the last two decades. As has been widely documented, expatriation is a crucial issue in such a process. However, the available academic literature has focused mainly on MNCs from industrialized countries, i.e. western and Japanese MNCs. Are there specificities in expatriation by Chinese emerging MNCs? Specificities may be expected due to the lack of experience of these MNCs, and due to particular conditions at home – including working and living conditions and the fact that most emerging Chinese MNCs are state owned, for instance. In order to answer such a question, this study is based on a qualitative investigation of 18 cases of carefully selected Chinese MNCs. Key words: emerging Chinese MNCs, expatriation policies, cross-cultural management.

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Bhumika Gupta and Jeayaram Subramanian

The Indian food processing industry is one of the largest in the world in terms of production, consumption, exports and growth opportunities. Small and medium-sized enterprises (SMEs) play a crucial role in this. Large manufacturing firms mainly dominate innovation studies in India. This chapter sets out to answer the important questions as to how SMEs manage innovation, given their limitations in resources, and as to what are the factors which affect innovation performance, given the resource constraints. To secure a meaningful answer to the research questions, this study considers the case of a medium-sized enterprise in the south Indian state of Kerala called ‘Canning Industries – Cochin’. The study results identify five major factors that affect innovation performance, namely technology, the labor market, financial resources, top management commitment, and customer and supplier relationships. Key words: food processing industry, SMEs, innovation performance, top management commitment, labor market, customer-supplier relationship.

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Robert Taylor

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).

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Pei Yu and Jean- Louis Mucchielli

This chapter focuses on MNCs’ R & D co-location strategies in China, and enriches recent studies by both theoretical and empirical aspects. Firstly, it constructs a conceptual framework on R & D co-location strategies, by combining location theory with R & D networking literature. Secondly, instead of a national level which causes aggregation bias, it focuses on a city level. It verifies the framework used by 185 US, 107 European and 115 Asian R & D affiliates’ location strategies across 27 Chinese cities, during the period 1992–2011. Thirdly, it adopts discrete choice models, which consider host geographic heterogeneity, to examine theoretical hypotheses. The results confirm MNCs’ cross-country differences in co-location strategies: US firms attach importance to external linkages, such as public knowledge resources and foreign R & D affiliates; however, European firms prefer internal linkages, such as intra-firm forward linkage, home country agglomeration and intra-industry spillovers. Asian firms adopt traditional cost- and market-seeking strategies. In addition, China’s geographic structure also impacts in a variety of ways on the sample firms. Key words: offshore R & D affiliates, co-location strategies, cross-country differences, China.

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Françoise Nicolas

The expansion of intra-East Asian trade over the past decades is now well documented. To explain this development, two salient features have often been underlined in the recent literature; firstly, the central contribution of China as a result of its economic rise, and secondly, the crucial role played by trade in parts and components and the emergence of regional production networks. To be more specific, it is a well-known fact that parts, components and intermediate goods account for the bulk of China’s imports from East Asia (especially from Japan, Korea and Taiwan), and that intra-East Asian trade is essentially intra-industry trade resulting from processing activities. Over the past few years, however, a number of developments have occurred which may bring about major changes in the way these countries are connected. Shifts in China’s economic policy in response to the global economic crisis constitute such changes. The objective of the chapter is to examine the changing nature and structure of two key bilateral relations, namely, Korea-China and Japan-China trade and investment linkages, to suggest explanations for these changes, and to highlight the implications for the definition of the countries’ economic policies and for their performances. The chapter starts by providing a comprehensive description of China’s role in the regional supply chain and the resulting pattern of trade and foreign direct investment (FDI) flows between China and Japan and China and Korea. It highlights the diverging paths followed by Japanese and Korean firms in their approaches to China. The chapter concludes by examining the implications this may have on the countries’ respective policy options, with a focus on their free trade agreement (FTA) strategies. Key words: regional production networks, processing trade, intra-industry trade, China, Japan, Korea.

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M. Bruna Zolin

In some emerging Asian countries, where there has been a gradual increase in income per capita and in population, especially in those countries where rice is the most important food, the need for food security and food safety can become an impediment to growth. The Asian continent has a shortage of available land and water resources compared to population. In some of the selected Asian countries in this chapter, namely Singapore, Taiwan, Korea, India and Japan, land scarcity is notable, while a dramatic deficiency in water is a common denominator. With increasing Asian urbanization, the need for processed foods has accentuated the importance of the food industry and of the retail sector whose outlets are not always sufficiently widespread and efficiently managed. Starting from this background, the aim of this chapter is to describe the food and beverages supply chain in the selected Asian countries, highlighting future trends and comparing the picture, where appropriate, with the European picture. Major international corporations, operating in the food supply chain, have in the mid-2010s launched or announced major investments in Asian countries. The chapter is divided into several sections. Starting with a brief description of the food supply chain, it goes on to analyse the dynamics of the food supply in quantitative and monetary per capita terms and then describes the strong dualism existing within the supply chain, focusing on selected Asian countries. Key words: food supply chain, multinational and small and medium-sized (SME) companies, dualism in the food sector, food security, food safety.

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Utai Uprasen

This study examines the displacement effect emanating from export competition between ASEAN and the U.S. into the EU market. This research adds to previous studies in that it takes into account the interaction between ASEAN and the U.S. in their export competition by endogenizing export variables in the model used. Additionally, the determining factor of the displacement effect is derived. Therefore, the cause of the displacement effect can be specified. The experiment is conducted at SITC 2-digit level of machinery and transport equipment (SITC 7) for five major industries under simultaneous equations. The empirical findings using panel data from 2003 Q1 to 2013 Q4 affirm that, from the point of view of ASEAN, the displacement effect is detected in two industries of three ASEAN countries. The empirical analysis has significant policy implications, given that the EU-U.S. FTA may come into force in the near future and ASEAN may encounter increased competition on exports from the U.S. to the EU market in these two affected industries. ASEAN needs to increase the level of competitiveness in the aforementioned industries to ensure accessibility to the EU market. Key words: the Transatlantic Free Trade Area, machinery and transport equipment, displacement effect, export competition, simultaneous equations, ASEAN.

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The classical origins of Akamatsu’s ideas: a missing link to David Hume’s ‘flying-manufacturers’ theory

The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation

Terutomo Ozawa

This chapter examines some important classical origins of Akamatsu’s ideas. While studying in Germany in 1924_26, Akamatsu was strongly influenced by a variety of the stages theories of development expounded by the German Historical School. As he himself acknowledged, ‘his’ idea of the infant-industry protection-driven, three-step sequence of import, domestic production, and export was directly borrowed from Friedrich List’s (1885/1966) book, The National System of Political Economy. However, why did Akamatsu fail to notice what may be called the ‘flying-manufacturers’ theory advanced by David Hume (1754/1985), a theory that no doubt adumbrated Akamatsu’s ‘flying-geese’ theory? This is probably because the German Historical School that stressed inductive reasoning and empiricism was at loggerheads with the British Classical School that by sharp contrast pursued deductive reasoning in search of universal abstract theories. Consequently, Akamatsu must have been blindsided by the German Historical School, missing a chance to read Hume’s writings. References: Hume, David (1754/1985), Essays: Moral, Political and Literary, ed. Eugene Miller, Indianapolis, IN: Liberty Fund. List, Friedrich (1885/1966), The National System of Political Economy, New York: Augustus M. Kelly Publishers.

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The dynamics of MNC-impacted comparative advantage: relevance to Ricardo’s view on FDI and Samuelson’s skepticism about globalization

The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation

Terutomo Ozawa

The notion of ‘pro-trade’ versus ‘anti-trade’ foreign direct investment (FDI) was conceptualized by Professor Kiyoshi Kojima (1921_2010) and theoretically formalized in an article in The Hitotsubashi Journal of Economics (Kojima and Ozawa, 1984a/1993; reproduced in the United Nations Library on Transnational Corporations, Vol. 8). The core idea is that multinational corporations’ (MNCs) overseas investments in emerging markets have two opposing effects on the basis for trade: one is to expand comparative advantage (that is, a pro-trade effect), and the other is to reduce comparative advantage (that is, an anti-trade effect). The pro-trade type of FDI is central to a successful ‘flying-geese’ formation. Furthermore, the above theoretical distinction helps clarify both David Ricardo’s (1817) pessimism about the welfare effect of cross-border investment on the home country and Paul Samuelson’s (2004) skepticism of the long-term benefit of free trade to the United States in an age of globalization. References: Kojima, Kiyoshi and Terutomo Ozawa (1984a/1993), ‘Micro- and Macro-Economic Models of Direct Foreign Investment: Toward a Synthesis’, Hitotsubashi Journal of Economics, 25 (1), 1–20. Reproduced in Gray, H. Peter and John H. Dunning (eds) (1993), Transnational Corporations and International Trade and Payments, Vol. 8 of United Nations Library on Transnational Corporations, London: Routledge. Ricardo, David (1817/1888), ‘Principles of Political Economy and Taxation’, in J.R. McClulloch (ed.), The Works of David Ricardo, London: John Murray. Samuelson, Paul A. (2004), ‘Where Ricardo and Mill Rebut and Confirm Arguments of Mainstream Economists Supporting Globalization’, Journal of Economic Perspectives, 18 (3), 135–46.

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The Evolution of the World Economy

The ‘Flying-Geese’ Theory of Multinational Corporations and Structural Transformation

Terutomo Ozawa

The world economy is near a critical crossroads, as a rising China, the greatest-ever beneficiary of US-led capitalism, ironically dreams big to replace America's supremacy as a new hegemonic power with a non-liberal world order. This third volume of the trilogy on ‘flying-geese’ theory reformulation explains how capitalism has changed industrial structures across the world. Using structural development economics and political economy analytics the unfolding changes in the global industrial landscape are examined in depth. Will the ‘flying-geese’ formation survive the formation that has produced the East Asian miracle and is hoped to spread to Africa?