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Edited by Maureen McKelvey and Jun Jin

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Peter J. Buckley and Hinrich Voss

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Peter J. Buckley and Hinrich Voss

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Peter J. Buckley and Hinrich Voss

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Shahid Yusuf

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Shahid Yusuf

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Shahid Yusuf

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Shahid Yusuf

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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.