Table Of ContentPolicy and Political Theory in Trade Practice
DOI: 10.1057/9781137398369.0001
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DOI: 10.1057/9781137398369.0001
Policy and Political
Theory in Trade
Practice: Multinational
Corporations and
Global Governments
Nikolay Anguelov
DOI: 10.1057/9781137398369.0001
policy and political theory in trade practice
Copyright © Nikolay Anguelov, 2014.
Softcover reprint of the hardcover 1st edition 2014 978-1-137-40192-2
All rights reserved.
First published in 2014 by
PALGRAVE MACMILLAN®
in the United States—a division of St. Martin’s Press LLC,
175 Fifth Avenue, New York, NY 10010.
Where this book is distributed in the UK, Europe and the rest of the world,
this is by Palgrave Macmillan, a division of Macmillan Publishers Limited,
registered in England, company number 785998, of Houndmills,
Basingstoke, Hampshire RG21 6XS.
Palgrave Macmillan is the global academic imprint of the above companies
and has companies and representatives throughout the world.
Palgrave® and Macmillan® are registered trademarks in the United States,
the United Kingdom, Europe and other countries.
ISBN: 978–1–137–39836–9 PDF
ISBN: 978-1-349-48658-8
Library of Congress Cataloging-in-Publication Data is available from the
Library of Congress.
A catalogue record of the book is available from the British Library.
First edition: 2014
www.palgrave.com/pivot
doi: 10.1057/9781137398369
Contents
List of Illustrations vi
Globalization Yesterday and Today:
Changes Matter
Theoretical Gaps: How Existing Theories
Fall Short When Assumptions Change
How Multinational Corporations Affect
Economic Growth Today: A Legacy of
Research and Theoretical Reasoning in
Turbulent Times
Methodological Exercise
Purchasing Innovation Globally: Mergers
and Acquisitions in Knowledge Sourcing
The Trade Policy Process in the United
States: Reversing a Legacy of
Liberalization?
“Double” Competition for FDI in the
United States: Is It Worth It?
Policy Implications
References
Index
DOI: 10.1057/9781137398369.0001 v
List of Illustrations
Tables
4.1 Cross-sectional time-series regression
analysis, GDP OER 49
4.2 Cross-sectional time-series regression
analysis, GDP PPP 50
5.1 OLS regression, 2008 on PPP GDP 67
5.2 Cross-sectional time-series regression
analysis, 1999–2009, PPP GDP 69
7.1 Cross-sectional time-series regression
analysis, state GDP 103
7.2 Cross-sectional time-series regression
analysis, FDI stock 105
7.3 Cross-sectional time-series regression
analysis, unemployment 107
Figure
4.1 Change in US exports in 2000–2006 for
top export markets 52
vi DOI: 10.1057/9781137398369.0002
1
Globalization Yesterday and
Today: Changes Matter
Abstract: Globalization’s impact on changing firm and
market characteristics is discussed. The focus is on growth
and proliferation of MNCs and their FDI. The chapter
defines what an MNC is, what it does, how it is created
today, where, and how it operates. The chapter outlines the
differences between modern day global enterprises and the
MNCs of the recent past.
Anguelov, Nikolay. Policy and Political Theory in
Trade Practice: Multinational Corporations and Global
Governments. New York: Palgrave Macmillan, 2014.
doi: 10.1057/9781137398369.0003.
DOI: 10.1057/9781137398369.0003
Policy and Political Theory in Trade Practice
Few would argue that globalization defines economic activity today.
Globalization has emerged as a comprehensive term describing the
process of international market integration and consumer preference
convergence (Townsend, Yeniyert, & Talay, 2009). Those two factors
vary in degree and magnitude across countries. The general trend of
convergence is accompanied by a process of location specific strate-
gies that firms employ to maximize global customer satisfaction. The
success of that process is dependent on market access. Therefore, the
creation of market integration policies has magnified and continues
to develop, driven by the economic interests of firms. As their assets
continue to internationalize, firms continue to push for the disman-
tling of political barriers to trade. The increased lessening of political
barriers to international trade has been greatly aided by the techno-
logical advances that have lowered the costs of transportation and
communication globally. These factors have shaped the expansion of
the geographic scope of markets (Adams, G., 2008; Ward, Bhattarai, &
Huang, 1999).
As market expansion has magnified, firms have transformed from
national to multinational to transnational. The difference between
multinational and transnational firms is in the concept of “born-global”
(Cavusgil & Knight, 2009; Knight & Cavusgil, 1996, 2004). Born-global
is the platform of new firm formation today. From their onset, modern
new enterprises are not bound by national boundaries but are rather the
creation of fluid international partnerships with multiple investors, stake
holders, and supply chains.
A multinational corporation has traditionally been viewed as the
natural progression of a national corporation that has internationalized
sufficiently and gone global (Johanson & Vahlne, 1977). This process was
achieved through many means—from building subsidiaries overseas to
the extent that business operations from them become just as, if not more,
valuable than home-country operations, to acquiring foreign corpora-
tions through strategic merger and acquisitions (M&As). Born-global
firms on the other hand are created international from the start. Even
though headquartered in a particular country, their assets, commercial
activities, and ownership are significantly internationalized. In that fact,
born-global firms have a nationality but not a defined national owner-
ship. In addition, many such firms seldom own any factors of produc-
tion, such as factories or research and development facilities, but rely
heavily on subcontracting from independent suppliers.
DOI: 10.1057/9781137398369.0003
Globalization Yesterday and Today
Characterized by high knowledge-intensive components and a great
degree of added value from specialized services such as design and
marketing, born-global firms produce fast moving consumer goods
(FMCGs) or consumer services. Examples are consumer products,
electronics, home products, clothes, foot and outerware, cosmetics and
fragrances, prepared foods and supplements, as well as telecommunica-
tions service platforms and cloud computing. The born-global concept
describes such conglomerates as Liz Claiborne, Nike, electronics giant
Logitech, and the all-indispensable Skype.
With the intensification of globalization and the increasing diversifi-
cation of corporate holdings the term that has emerged to best describe
this pervasive internationalization of assets and operations to include the
subtle, if not contentious, difference between “multinational” and “tran-
snational” is global enterprise. Global enterprise denotes that even if a
firm started as national and has grown to multinational, it is no differ-
ent in its global market reach and positioning than a born-global firm.
Still, the preferred common name of global enterprise is a multinational
corporation. The general public understands the concept through that
name and there is also a legacy component for its endurance. Much of
the policy discussion and academic literature of the past three decades
for and against globalization has centered on the dealings of MNCs or
MNEs—multinational enterprises.
An MNC can be viewed as a network of activities located in different
countries (Kogut & Kulatilaka, 1994). Those activities include all aspects
of production. Today they range from research and design to prototyp-
ing to partial assembly to finishing, packaging, warehousing, distribu-
tion, and customer service. MNCs not only sell in foreign markets but
many also control foreign firms. For example, American General Motors
(GM) owns 50.9% of GM Daewoo in Korea; German Daimler owns 85%
of Mitsubishi Fuso in Japan, and French Renault owns 70.1% of Renault
Samsung in Korea. Renault also owns 44.4% of Nissan in Japan and
Renault’s CEO serves as Nissan’s CEO (Ishikawa, Sugita, & Zhao, 2008).
Such interconnectedness blurs national economic interests and chal-
lenges conventional economic classifications of imports, foreign assets,
and exports. Firms can simultaneously export to a market and export
from it. For example, GM is the 100% shareholder of Opel in Germany
and Saab in Sweden, as well as a partial shareholder of Daewoo in Korea
and Suzuki in Japan. GM exports its Opels from Germany mostly to the
rest of continental Europe and parts of Asia, Saabs from Sweden mostly
DOI: 10.1057/9781137398369.0003
