MNE Affiliation,Firm Size and Exports Revisited: A Study of Information Technology Firms in India

In this study we argue that the export performance of affiliates of multinational enterprises (MNEs) in developing countries is determined differently from that of licensees of foreign firms or of domestic firms. Our empirical results for the information technology sector in India show that exports of MNE affiliates are greater when they have larger foreign equity stakes that bring more tacit knowledge transfer and complementary FDI advantages and when they import more explicit technology from the purchase of licences. Standard export determinants such as firm size and capital intensity do not matter for MNE affiliates, but they do for licensees and domestic firms.     

The Truth about Trade: The Real Impact of Liberalisation

The usual perspective on technology spillovers from FDI sees the MNC subsidiary as a passive actor. It presumes that the technological superiority that spreads from subsidiaries to other firms in the host economy is initially created outside it by MNC parent companies, and is delivered to subsidiaries via international technology transfer. The role of subsidiaries is little more than to act as a ‘leaky container’ lying between the technology transfer pipeline and the absorption of spillovers by domestic firms. This paper suggests a different model in which a substantial part of the potential for spillover is created within local subsidiaries as a result of their own knowledge-creating and accumulating activities in the host economy. We explore empirically the effects of these activities on technology spillovers from FDI using data for industrial firms in Argentina over the period 1992–96. The analysis suggests that significant results can be obtained incorporating subsidiaries' own technological activities as an explanatory variable of the spillover process.     

Should the African lion learn from the Asian tigers? A comparative-historical study of FDI-oriented industrial policy in Ethiopia,South Korea and Taiwan

Ethiopia’s economy has been growing at breakneck speed for well over a decade now, earning the nickname as Africa’s lion. In recent years, the development literature on Ethiopia has paid particular attention to the role of industrial policy, especially the ways in which the Ethiopian experience compares to that of the Asian tigers. But through this comparative-historical perspective, little attention has been devoted to an important aspect of industrial policy in Ethiopia – foreign direct investment (FDI) in the manufacturing sector. This paper compares FDI-oriented industrial policy in Ethiopia in the current era (particularly focusing on light manufacturing) to that of South Korea and Taiwan between 1960 and 1990, arguably the two most generalisable cases among the Asian tigers. The paper argues that FDI-oriented industrial policy in Ethiopia seems to be bringing about short-term economic benefits, and is showing promise for further industrialisation. At the same time, it could benefit from taking more lessons from the long-term economic development perspective that characterised South Korea’s and Taiwan’s approach to FDI. Such a long-term perspective most importantly includes pro-active strategies to transfer technology from foreign firms to the domestic economy and the creation of backward linkages from foreign to domestic firms.     

Evaluating differences in technological activity between transnational and domestic firms in Latin America

This study uses a sample of Latin American firms from four areas to compare the performance and technological activity of transnational to domestic firms. After accounting for scale, age and location of firm, we find few differences in either traditional methods of growth or profitability or in implementation of new technology embodied in processes or products. There are important differences in the sources of new technology. Domestic firms have a relatively higher level of internal innovative activity, whereas foreign firms rely more heavily (but not exclusively) on sources external to the subsidiary.     

Firm size and export behaviour: An Indian case study

In the context of Indian industry, this article argues that in the presence of capital market imperfections and sub‐optimal contractual arrangements, small firms face higher transaction or selling costs in the domestic market. One of the strategic responses by small firms towards overcoming the mobility barriers imposed by high transaction costs in the domestic market is to break into the competitive world market. Small firms that could realise a critical level of production efficiency and possible information externalities that arise through inter‐firm linkages might be the ones that could succeed in exports. The empirical observations derived from the analysis of firm level survey data provide reasonable support to the main arguments.     

Renminbi appreciation and Global Value Chains in China: exploring the linkages

China has experienced a rapid integration into Global Value Chains and a decade long appreciation of its exchange rate. However, these trends have been analysed largely in isolation from each other. In this paper, we explore the linkages between the two based on interviews with a sample of firms in Jiangsu Province. We show (1) how the distribution of the costs and benefits of exchange rate appreciation depends on the power hierarchies between firms in GVCs; (2) how exchange rate changes are important drivers of upgrading and even downgrading in GVCs; and (3) that the firm heterogeneity evident in GVCs provides additional insights into the politics of exchange rate determination in China.     

Economic liberalisation for high-tech industry development? Lessons from China's response in developing the ICT manufacturing sector compared with the strategies of Korea and Taiwan

Abstract

This paper argues that China's response to economic liberalisation, which artificially focuses on promoting particular sizes of firms, cannot improve technological capabilities in the ICT manufacturing industry. Not only have historical and economic conditions created difficulties in adopting Korean and Taiwanese style policies, but also competitive ICT firms in the global economy are increasingly moving from manufacturing to innovation activities against a backdrop of increasing economic liberalisation. Given the WTO and ITA agreements, the main path which Korea and Taiwan employed is now unavailable. The government therefore should leave the size of firms to market forces.     

Foreign Direct Investment Spillovers and Productivity Growth in Indonesian Garment and Electronics Manufacturing

Inflows of foreign direct investment generate externalities that spill over to domestic firms and raise their productivity. This article examines the extent of spillover effects of foreign direct investment for firms in the highly disaggregated garment (ISIC 3221) and electronics industries (ISIC 3832) in Indonesia. Both are export-intensive industries, but differ greatly in technological sophistication and labour intensity. Changes in both the productivity level and rate of growth in each industry are decomposed into the effects of technological change, technical efficiency change and scale efficiency change and then the impacts of spillovers on each component and on total productivity are estimated. The findings suggest that foreign direct investment generates a positive effect on total productivity change, technical efficiency change, technological change, and scale efficiency change in the garment industry. In contrast, foreign direct investment contributes significantly negatively to total productivity, technological change and scale efficiency change, but has no significant effect on technical efficiency change in the electronics industry.     

Agglomeration Advantages and Capability Building in Industrial Clusters: The Missing Link

Accumulation of technological capability is crucial for industrial growth and competitiveness of firms, particularly in the context of liberalisation and increasing international economic integration. The article sheds new light on the forces driving capability-building by complementing the micro-economic perspective on learning with a meso-economic perspective that takes account of interaction effects arising from firms' embeddedness in regional networks. The missing link at the interface between the two levels is explored by means of a taxonomy linking various agglomeration advantages to investments in technological effort. The framework results in new policy-relevant insights about the factors underpinning the acquisition of capabilities in comparison to conventional studies. A case study about farm equipment manufacturing in Pakistan's Punjab province is used as an empirical illustration.     

Spatial Spillover Effects from Foreign Direct Investment in Vietnam

This paper investigates the role of inter-firm interaction and geographical proximity in the determination of productivity spillover effects from foreign to domestic firms. We developed an estimation approach using the Spatial Durbin model and applied this to a firm-level dataset from Vietnam from 2000–2005. We found that productivity spillovers diminished when the distance between foreign and domestic firms increases and that interactions among local firms amplify the spillovers. Within short distances, the presence of foreign firms creates positive backward, negative forward and horizontal spillovers. Based on the findings, several implications are extracted regarding promotion policy for foreign direct investment in developing countries.     

The political economy of global firms from India and China

This article attempts to build a bridge between contemporary studies of global firms from emerging economies and existing theories in comparative political economy. It argues that given the primacy of the state as an economic actor in developing countries, the variety of capitalism literature could provide a theoretical foundation for firm-level analyses of emerging market multinationals. For example, the authors suggest that China and India may be moving towards a ‘hybrid market economy’. They also offer a typology of Indian and Chinese corporates to demonstrate an empirical approach to analysing domestic business–government relationships and the ways in which these firms are shaped by the peculiarities of their respective institutional setting. Finally, they identify some of the likely pitfalls of doing cross-national comparisons of emerging market multinationals, particularly with respect to the reliability of corporate data.     

Absence of Vertical Linkages and the Quest for Decentralized Service Delivery in Pakistan: An Innovation under Constraints

Local Government Ordinance, 2001 aimed to create a service-orientated local government by devolving many public services from the provincial to local levels. However, in many cases, local governments either did not have the capacity to manage them or the services extended across different geographic jurisdictions. The new system also restructured the three sub-national levels but without any vertical hierarchical linkages between them, and asked them to coordinate public service provision between them. This article suggests different remedies, including developing vertical administrative linkages and the reconstitution of Zila Mushawarat Committee to undertake coordination functions at intra-district level.     

DOES DISPERSED PUBLIC OWNERSHIP IMPAIR EFFICIENCY? THE CASE OF REFUSE COLLECTION IN NORWAY

Corporate governance theory suggests that companies with dispersed and indirect ownership suffer from agency costs. A worst case is where several political authorities jointly own a company, which allows managers to operate with inferior efficiency. In political economy, the manager is not the major agency problem. Elected politicians may impair efficiency to improve their re‐election prospects. Since politicians have less influence in jointly owned firms, such companies are expected to perform better than those owned by a single public authority. Consistent with corporate governance – but not political economy – the empirical analysis suggests that dispersed municipal ownership impairs cost efficiency. In the Norwegian case of municipal refuse collection presented here, costs of dispersed ownership often outstrip gains from economies of scale. Use of jointly owned companies is not necessarily a proper response to efficiency problems inherent a fragmented local government structure.     

Public Procurement Directives in the European Union: A Study of Local Authority Purchasing

Prompted by the Single European Market initiative, virtually all public procurement, except for defence equipment, is now subject to European Union rules which prohibit discriminatory (buy national) purchasing policies. This paper examines the impact of recent procurement Directives on local authority tendering and contract award behaviour (compliance), and considers whether the legislation has been successful in opening-up such public procurement to international competition. Although local authorities are making extensive use of the Official Journal to advertise their requirements, there is evidence that purchasers do not always adhere to the new legislation and it is not obvious that adherence to the legislation is improving. Moreover, an analysis of local authority contract award data for 1993 revealed that almost all contracts were won by domestic firms. However, doubts about the ultimate ownership of such firms and the sourcing of components means that there remains considerable scope for further work.     

Observing FDI spillover transmission channels: evidence from firms in Uganda

Abstract

We observe and analyse three intra-industry foreign direct investment (FDI) spillover transmission channels using unique firm-level data collected from on-site interviews and observations regarding domestic and foreign firms operating in Uganda in 2015. Our main results are: (1) the spillover effects mainly depend on the channel(s) by which they occur (the competition channel is most important while spillover benefits through the worker mobility and the imitation channels are less prevalent) and (2) both positive and negative spillover effects occur within the same channel and, moreover, effects differ by channel for the same case. These are novel and challenging findings that have not yet been recognised in theoretical and empirical research on FDI spillovers. Our results suggest that long-term pecuniary spillover effects are predominantly stimulated via the competition channel and show that only limited short-term and long-term technological spillover effects occur through the imitation and the movement of workers channels. These channels are not only less prevalent, but also appear to be constrained by competition-determined spillovers. We are confident that these directions for future research will have a high pay-off because, as shown by this exploratory fieldwork, a more complete picture of the spillover effects is reached when the channels are considered simultaneously.     

Will the Digital Revolution Revolutionize Development? Drawing Together the Debate

This concluding article returns to the broad question that motivates this special issue ofStudies in Comparative International Development: Will the Digital Revolution constitute a revolution in development? In addressing this issue, we explore a number of common themes emphasized by the different contributions: the future of the North-South divide, the role of the state in promoting digital development, the transferability and adaptability of specific information and communication technologies, the challenges and potential benefits of controlling digital information, and the developmental effects of digitally enabled communities. We argue that the Digital Revolution's ultimate impact on development will depend on several key variables, including the extent to which these technologies foster within-country linkages among different sectors and socioeconomic classes; the degree to which new technological applications may be customized or transformed to advance local development; and the outcome of political contests between organized interests that are promoting different ways of organizing and governing the global digital economy. While it is difficult to fully assess a transformation while living in the midst of it, research on the social, political, and economic implications of the Digital Revolution will constitute an important agenda for development scholars in the years to come.     

Outward Orientation,Investment and Finance Constraints: A Study of Indian Firms

We investigate the presence of finance constraints on firms' investment behaviour using Indian manufacturing as a case study. This question becomes particularly interesting in the post-1991 period when substantial market oriented reforms were undertaken. We argue that in the Indian institutional context (especially, the underdeveloped state of bankruptcy laws and restrictive exit procedures) outward orientation rather than size is the relevant criteria for distinguishing firms that may be 'finance-constrained' from those that are not. Using panel data for 718 Indian manufacturing firms for the period 1993-98, we find that exporting firms are less constrained in financial markets than firms which sell primarily to domestic markets.     

Exports,Outward FDI and Technology Upgrading: Firm Level Evidence from India

This paper evaluates the individual and combined effects of exporting and outward foreign direct investments (OFDI) on firms’ technology investments at home using firm-level data from the pharmaceutical industry in India. The analysis accounts for unobserved firm heterogeneity and the endogeneity of the choice of foreign market participation, and shows that exporting has been an important channel through which Indian multinational expansion has encouraged greater domestic technological activity. However, all else constant, higher levels of OFDI have rather acted as substitutes for such technological efforts.     

A comparative analysis of the impact of the 1997 Asian crisis and the contemporary global economic crisis on the Korean political economy

The 1997 Asian crisis created a political space for neo-liberal reformers within the Korean state to advance a set of policies that had previously been frustrated. This agenda is widely seen to have stalled following an initial burst of neo-liberal reform in the post-crisis period. Several scholars have argued that a partial reconstruction of an economy dominated by a closed nexus between the state and leading domestic firms is taking place in contemporary Korea. Compared to the 1997 crisis the macroeconomic impact of the contemporary crisis on Korea has been limited. However, Korea initiated the largest fiscal stimulus (in relation to GDP) in the Organisation for Economic Co-operation and Development. In terms of the policy environment the impact of the contemporary crisis has been considerable. This paper argues that key aspects of the Korean state's response to the crisis represent a selective limited retreat from neo-liberalism, the significance of which should not be overstated.     

Automotive global value chains in Mexico: a mirage of development?

ABSTRACT

International monetary organisations argue the ‘developing countries’ should foster linkages to the world economy as a means to overcome backwardness. In this article we refute the narrative that Mexico has experienced industrial upgrading. Rather, industrial growth in Mexico over the last 40 years has been shaped by neoliberal economic policies which have turned the Mexican economy into an export-led manufacturing platform designed to supply the North American market, sustained by a precarious labour market. As a result, Mexico occupies the most labour-intensive and low value-added segments of regional production chains. To make this argument, we perform an in-depth analysis of the Mexican automotive industry, demonstrating that instead of being an engine for domestic industrial development, the auto industry has become a dominant economic sector through productive hyper-specialisation concentrated in the northern Mexican border states, a reliance on transnational capital, particularly from the United States, a disconnect with domestic markets, and the super-exploitation of labour.