Rethinking MNE-Emerging Market Relationships: Some insights from East Asia

Access to files

• FULL-TEXT.PDF (octet-stream)

Abstract

It is generally agreed that over the past two decades or so, multinational enterprises (MNEs) have had the upper hand in less developed countries (LDCs) (Buckley and Ghauri 1999; Dunning and Narula 1999; Ghauri and Buckley 2002; Jenkins 1999; Narula and Dunning 2000). Over this period, the general trend has been for a steady change in the policy stance of LDCs away from control, structuring, and regulation of MNEs and toward the liberalization and facilitation of MNE operations in their economies. Governments were persuaded that the adoption of liberal and pro-MNE policies was generally beneficial to their economies. In any case, their bargaining power was generally weakening due partly to changes in the international policy environment, such as pressure from the World Trade Organization (WTO) toward increasing liberalization of world trade and investment, and partly to changes in MNE strategies toward greater cross-border integration and increasing emphasis on efficiency seeking investments. Over the last several years, however, there has been a noticeable shift in the intellectual climate with respect to the appropriate policy stance in regard to LDCs vis-a`-vis MNEs. This shift can be characterized as a retreat from at least the extreme forms of liberalization with their advocacy of a minimal state and is linked to a more general disenchantment with globalization and the emergence of a movement for a global civil society (Buckley and Ghauri 1999; Stiglitz 2002). In the specific context of LDCs, many scholars now reject the view that the economically valid or legitimate scope for government inter-vention is limited to establishing macroeconomic stability. The assumption that market forces, once liberated from government controls, can automatically generate economic development is increasingly questioned. This questioning has gained ground as liberalization failed to deliver the expected economic performance in most emerging economies and, even more dramatically perhaps, in a number of transitional economies (notably the Russian Federation) that implemented liberalization/marketization policies most enthusiastically (Stiglitz 2002). Narula and Dunning (2000, 115) capture the emerging consensus succinctly when they observe that “On its own, liberalisation—as with excessive protectionism— is insufficient as a driver of growth.” Also needed is a set of measures and policies that creates supporting institutions and stimulates a developmental orientation in market forces (Lall and Teubal 1998; Narula and Dunning 2000; Ocampo 2002; Perez-Aleman 2000; Stiglitz 2002; Yamin 1998). This paper considers one particular manifestation of this change—the advocacy of a more active industrial policy, particularly in shaping MNE activities in emerging economies, than had hitherto seemed advisable. Our aim is to contribute to the critical perspectives on international business and the MNE (Forsgren 2002; Ghauri and Buckley 2002; Havila, Forsgren, and Hakansson 2002) and more specifically to highlight the changing views relating to the positive role that policy intervention can have in maximizing the developmental impact of the MNE. This paper explains that the change in the intellectual climate hinges specifically on two issues: first on a growing realization and emerging consensus that East Asian industrialization was a governed process (Wade 1990) and was not market led, and second on the stark contrast between rapid industrialization in East Asia and near economic stagnation in the bulk of LDCs where government had followed a liberalization approach.

Bibliographic metadata

Institutional metadata

Record metadata