Multinational firms in the world economy pdf

According to the authors, there are three types of market failures: the hold-up problem, the dissipation of intangible assets, and principal—agent relationships between multinationals and local firms. The potential losses caused by an altered relation- ship result in underinvestment. The dissipation of intangible assets occurs when a foreign firm cannot avoid losing control over valued assets because of its contractual relationship with a local firm. The principal—agent problem occurs because of hidden actions or hidden information about local market conditions.

The local firm may have an interest in concealing local market information from the foreign firm. Another chapter summarises large-n quantitative research on the determinants of FDI flows and other indicators of multinational activity.

The main factors examined in this chapter are plant-level economies of scale, firm-level research intensity, home- and host-country market size, geogra- F phical distance and other possible barrier-related factors , and transportation O costs. At the end of the chapter, the authors provide suggestions about how to improve existing quantitative PR research by allowing for a variety of motives for foreign investment HFDI, VFDI, and combinations thereof , by including both firm-level and country- level variables in the analysis, and by separating mergers and acquisitions D from greenfield investments empirically.

Unlike other works, it does not ignore negative effects of multinationals. It does not, however, discuss potentially negative cultural impacts of the branding and marketing strategies of global oligopolies. The authors put the onus on governments to see to it that the positive benefits of globalisation can be felt beyond the narrow circle of industrialised and industrialising countries.

F I would recommend this book for graduate students and for advanced O undergraduates in economics or political economy programmes. Archibugi, J. Howells and J. Michie, eds. Ietto-Gillies, G. Pearce, R. Veugelers, R. Winter, S. Williamson and S. Winter, eds. Zanfei, A.

Whereas most international investment takes place within developed countries and regions, such as the European Union and the United States, FDI flows to developing countries have increased enormously since Over the past decades, researchers have identified numerous determinants of foreign investment flows, including economic and political factors, that influence the level of FDI.

Evidently, political risk is one of them, in particular in emerging market economies and developing countries.

Most TNCs do not invest in the poorest countries of the world, including most of sub-Saharan Africa, partly due to high uncertainty regarding political risk in many of these countries. This is unfortunate as FDI inflows may particularly benefit developing economies, since foreign investors are likely to introduce new technologies, augment the capital stock of the host country, increase competition within key sectors of the economy and benefit local workers through more and better- paid jobs.

Hence, political risk analysis is of particular importance to developing countries, in order to shed new insights on how to measure and to deal effectively with political risk.

This is exactly the main focus of the present book. It provides insights on the theory and measurement of political risk by developing a new model that goes far beyond other approaches that have been published in the previous literature.

The present book consists of seven chapters. Chapter one introduces the topic of the book and provides a first definition of the term political risk from the perspective of a TNC. In short, political risk is the probability that the action of stakeholders Transnational Corporations, Vol.

The chapter then precisely lays out the research problem and main questions to be addressed, and gives an overview of the research methodology used as well as of the structure of the book. The opening chapter does a good job in motivating the reader and provides valuable information on the most important concepts and methodologies. In the following, I will review each of the remaining six chapters and then conclude with an overall assessment of the book, that is, what I consider as its main contribution to the literature and its omissions.

The second chapter carefully provides more details on political risk and related concepts, such as country risk. This approach makes sense, as both terms are often used in a confusing way. In addition, chapter two sensibly differentiates between predicting, forecasting, forewarning and anticipating political risk, since most users of political risk models demand information on the likely impact of events to come.

The book carefully describes the different concepts and specifies that any forecast has to be seen from the perspective of a probability that a country might pose a certain degree of political risk to foreign investors. The chapter reveals the somewhat embarrassing failure of existing risk rating agencies and methodologies to spot the Asian financial crisis in The present book argues convincingly that the Asian crisis, while predominantly a financial and economic crisis, was partly related to the political risk aspect.

If different political systems had been in place and the reaction to the actual events had been different, the crisis would probably have been less severe. For the risk analysis systems used by political risk rating agencies, it is Transnational Corporations, Vol. Therefore, the chapter underlines the need for a more careful methodology to measure political risk. In the fourth chapter, various factors that determine political risk are presented.

More specifically, the political, economic and social risk factors that are used in the design of the subsequent model are extensively discussed.

This approach is reasonable, since a careful explanation of the different indicators and their interactions is essential to grasp the complex issue of political risk and to convince the reader that the model adopted is a useful extension of previous attempts to measure political risk across countries.

Overall, measurable risk factors and their risk factor indicators are presented. Furthermore, qualitative measures are incorporated in the analysis, which is more difficult to measure in comparison to quantitative indicators.

Importantly, the factors chosen originate not only from political events and financial economic statistics, but also from the socio-cultural characteristics of each country. By focussing on such an exhaustive list of indicators, this approach ensures a thorough analysis of political risk, in particular in comparison to previous attempts in political risk analysis.

Following the presentation of the various factors, chapter five specifies the model for political risk analysis. It provides the scoring guidelines, weights and calculations that are behind the model for political risk analysis. Since the model itself is relatively simple in its structure, the chapter in effect explains the weights and aggregation procedures for the different indicators.

It is pointed out in this chapter that the weights themselves are rather arbitrarily chosen, which leaves the reader somewhat unconvinced about the particular figures assigned. Nonetheless, any quantitative analysis of political risk involves the challenges of both aggregation and weighting and it is unclear how other approaches would look like.

Crucially, it is explicitly stated that the weights may vary depending on the investor and the industry concerned. By identifying the most important aspects of political risk, a certain structure is given to the complexities of the decision of the management.

While most TNCs use political risk insurance offered by, for instance, the Multilateral Investment Guarantee Agency MIGA or national insurance corporations, to reduce or eliminate political risk, not all projects and countries can be covered by this type of insurance.

Importantly, it is emphasized that any effective risk management means that foreign investment in a region like sub-Saharan Africa would increase if TNCs improve their risk reduction management. This, in turn, would provide some of the poorest countries in the world with much needed additional capital.

Finally, chapter seven concludes with a summary of the most important results and a discussion for further research in the field of political risk analysis. Overall, this carefully written book is an important contribution to political risk analysis.

In particular, the meticulous presentation of different risk factors and the explanation of the aggregation methodology provide a significant improvement of previous risk models. However, one part that seems to be missing is an application of the model. It has been pointed out in many different sections in the book that existing models of political risk analysis and services failed to give any early warning signals before the Asian financial crisis in the late s.

As an empirical economist focussing on trade and FDI in emerging market and developing countries, I would be very interested in an application of the model to the Asian crisis or any other major crisis in which political risk has played an important role. Above all, I am curious as to whether the proposed model would give any signals or, more realistically, show that the probability of a crisis in terms of increasing risk increased in the first half of , that is, shortly before the Asian crisis took place.

Needless to say, since both global tensions and uncertainties are growing, the issue of political risk increases in significance. Hence, we do have a need for more research on the determinants of political risk.

Taken as a whole, the book makes a valuable contribution to the literature on political risk. In addition, it provides rather useful tools for research analysts and TNCs in analysing and managing risk in difficult and uncertain environments.

Megginson Oxford, Oxford University Press, , pages This new book by William Megginson aims to tell, in an interesting and well-founded manner, a story of how privatization policy rose from a rather radical notion of economic orthodoxy to a widely implemented process that, over the past 25 years, substantially changed the view on how we perceive the role of the government in business and in the economy as a whole.

The author is well known to academics and analysts for his extensive published works on the topic, many of which were based on comprehensive empirical cross-country research. The book begins with a brief history of the rise and fall of State ownership in order to enable the reader to understand better the actual economic rationale and need for privatization policy.

The author surveys the role of State ownership as an economic model from ancient times to the late s and attempts to explain what motivated governments to establish SOEs or to nationalize private businesses. Then, he turns to the discussion of the first privatization programmes — their intentions and outcomes.

After the initial Chilean and the United Kingdom privatizations in the late s, one could observe a truly phenomenal growth of privatization programmes and the reduction of State ownership throughout the world. The author explains that many governments have enthusiastically embraced privatization, mostly because they bring large revenues without Transnational Corporations, Vol.

Two thirds of the total proceeds originate from privatization of utilities, oil and gas companies and financial institutions. In the second chapter of the book, the author attempts to answer the question of why governments actually privatize. He starts with a discussion of the theoretical arguments in favour and against State ownership of business enterprises. Giorgio Barba Navaretti and Anthony J.

Cite this. About this book Depending on one's point of view, multinational enterprises are either the heroes or the villains of the globalized economy. He has coauthored and coedited a number of books, most recently Labour Markets, Poverty, and Development Oxford University Press, Anthony J. Reviews "[This book] is an extremely welcome addition to the literature and profession.

Blonigen, Journal of International Economics "This lucid, authoritative and comprehensive book will be of great value to anyone interested in the role of multinational enterprises in the modern world.

Venables Navaretti, G. Navaretti G, Venables A. Copy to clipboard. Log in Register.