Improving the developmental impact of multinational enterprises: policy and research challenges

Abstract

We summarize the key empirical evidence on the nexus between MNEs and development, focusing on issues that are relevant for the formulation, implementation and assessment of policies by host developing countries. We also delve into what we do not know, as well as topics for which the evidence is still quite blurred. We discuss the reasons for the absence of clear evidence, and potential avenues for future research to improve policies. Although most countries rely on MNEs/FDI as a central plank of their development strategy, the collective weight of academic research has not led to a fine-tuning of policy implementation. Countries still rely on policies for which evidence is sparse, or no longer valid in an era of globalisation. Much of the literature has focused on externalities and spillovers, and has deemphasised the other 'effects' of MNE activity, implicitly assuming that MNEs are almost always beneficial for development. Few rents are costless when the opportunity costs of scarce resources are considered, especially in the longer term. Despite the abundance of empirical studies (of increasing sophistication), most ignore the significance of structural change. Growth and the interaction with MNE activity is not linear or monotonic over time, because the economy itself is in a constant state of flux.

Enforcing higher labor standards within developing country value chains: Consequences for MNEs and informal actors in a dual economy

“…The mainstream view on MNEs and development has been that, on the whole, MNEs have a net positive effect on development, through a variety of means including employment, capital and knowledge flows, training, competition and demonstration effects (Narula & Dunning, 2010, Narula & Pineli, 2019. This may be so, but it is important to acknowledge that there are also adverse and unintended consequences (Giuliani & Macchi, 2014).…”

“…On the one hand, high levels of informality can underlay the cost competitiveness of labour-intensive production. Countries explicitly rely on MNEs for employment creation and skills upgrading (Narula & Pineli, 2019). Governments are aware that informal sector, as a source of low-cost inputs, is a significant beneficiary.…”

MNE–SME cooperation: An integrative framework

“…While this is useful in its own right, i.e. as a means of shedding light on important aspects of how the MNE operates on a global basis, it is also useful for elaborating on some of the ways that MNEs are responding to broader societal goals pertaining to sustainability (Kolk, 2016;Narula & Pineli, 2018). As argued by Buckley, Doh and Benischke (2017), there is value in IB research addressing grand challengesambitious but achievable aimsassociated with broader societal goals.…”

Political governance, civil liberties, and human capital: Evaluating their effect on foreign direct investment in emerging and developing economies

“…We provide insights on the ways host country governments can maximise benefits and minimize costs of FDI. Narula and Pineli (2018) show that MNE operations can have both positive and adverse effects on the economic development of host countries. They argue that a full understanding of the impact of MNE activities on economic development requires taking a global value chain perspective.…”