This paper studies foreign direct investment spillovers on the gender-related labour market practice of domestic firms, based on a unique firm-to-firm data set of Bangladesh’s textiles and garment sectors. The paper looks at the female employment of domestic firms that are directly and indirectly related to foreign- owned firms through supply chain linkages. These domestic firms are either the local suppliers or customers of foreign-owned firms, or they share local suppliers and customers with foreign-owned firms. The estimates show that domestic firms related to foreign-owned firms have significantly more female administrative workers, but not necessarily more female non-administrative workers, owing to the former participating in more firm-to-firm interactions.
This book is a valuable reference document for the study of the evolution of contemporary socioeconomic life, marked by radical changes in structures, behaviours, methods of production and consumption, and rules of the social game. The current changes are of a “revolutionary” nature and thus make possible the vision of the future, which is necessary to decide on investments (material or immaterial). The uncertain dominates. Optimistic thinkers or actors believe that insofar as nothing is safe, everything is possible. But we still have to understand what is desirable, necessary or possible, because opportunities and risks are linked. The analysis of key success factors that are, or have been, actually operational is therefore of the highest interest.
A long and well-established literature exists on the role of multinational enterprises (MNEs) in transferring technology around the globe, enhancing local productivity. However, we know very little about the impact of foreign direct investment (FDI) and multinational enterprises on gender policy and practice. In this research, we focus on the role of MNEs in potentially promoting female empowerment and gender equality in Brazil. First, the research performs a descriptive exercise on the gender composition and gender earnings gaps at MNEs versus domestic firms. Then, we ask whether workers moving from multinational to domestic firms can transfer information about gender practice, by exploring the relationship across domestic firms with various proportions of workers with previous experience in a multinational. Unfortunately, despite the many theoretical reasons to expect MNEs to support and transfer best practice in gender policy, these ideas are not borne out in the data. Multinational firms employ fewer women and exhibit higher gender earnings gaps than their domestic firm counterparts. For this reason, it is no surprise that domestic firms with high shares of former MNE workers are not different from domestic firms with fewer former MNE workers in terms of gender policy and practice. Our work emphasizes the need for domestic policy to enhance the status of women in the economy and the international community to support best practice in gender policy across all types of firms.
This paper constructs and analyses a set of novel indicators on gender equality in the business sector, which focus on multinational enterprises and foreign traders in Finland. The descriptive analysis reveals large differences in the share of women and men employed in the best paying professions, especially in multinationals. Dynamic analysis shows that foreign investment typically results in pay increases for males, while this is not true for women. These disparities are strongest among managers and professionals working in the most profitable firms. A blueprint is provided for linking business statistics and social statistics to enable analyses of gender inequalities in the labour market.
The current stage of globalization involves geographically dispersed research and development (R&D) investments that are not confined to advanced economies. These cross-border R&D investments are driven by multinational enterprises’ (MNEs’) strategies for exploring and/or exploiting foreign locations. In this paper, we analyse location choice and the moderating effect of project-level investment strategy (i.e. exploration or exploitation) and type of host economy (i.e. advanced or emerging) on the importance of the innovation framework and local innovation capabilities. Our analysis of 588 R&D-related foreign direct investment (FDI) projects in the pharmaceutical and biotech industries during the 2006–2016 period reveals that whereas a host country’s innovation framework and capability overall do affect the location decision, their ultimate effects are conditional on the combination of project-level investment strategy and type of economy. Our findings have policy implications for FDI policies aiming at enhancing linkages between MNEs and local actors and national science, technology, innovation and educational policies and programmes.
This paper offers preliminary evidence of the extent to which global FDI patterns have responded to the sharp increase in trade barriers since 2018, focusing in particular on the impact of new United States tariffs imposed on imports from China. Using detailed project-level data on new greenfield FDI as well as complementary research, this paper tracks the differential changes in FDI across countries and industries most affected by the trade tensions. There is some evidence of diversion to South-East Asia in specific industries, confirming findings of other research, but the aggregate effect on investment in China is limited and the overall effect on investment in South-East Asia is actually negative. A possible explanation lies in the importance of global value chain linkages as key determinants of firms’ investment decisions.
We study an often-overlooked factor behind gender inequality: globalization, in particular, foreign direct investment (FDI). Building on a growing literature that studies the impact of trade and FDI on gender inequality, we test whether foreign-owned firms exhibit a different gender wage gap (GWG) than firms with domestic ownership, using unique South African administrative matched employer-employee data. We find that the unconditional GWG is substantially smaller in foreign-owned firms than in firms with domestic ownership. We also find that for foreign-owned firms this difference is reversed once we control for a large set of fixed effects. In our preferred specification, foreign-owned firms have a larger GWG of about 2.4 percentage points. The share of women employed in foreign firms is lower than in firms with domestic ownership, in contrast to similar studies, which may indicate an underlying inequality in opportunities for women within a developing country context.
This research note reassesses UNCTAD’s transnationality indices in light of recent economic trends that are quickly changing the international investment landscape: the digital economy, the new industrial revolution and the resulting asset-light international business models. The recent international “Agreement on a Two-Pillar Solution to Address the Tax Challenges Arising from the Digitalisation of the Economy” through the Base Erosion Profit Shifting project emphasizes the importance of fully understanding and correctly interpreting the implications of digitalization for investment and development policy. The analysis shows that UNCTAD’s internationalization indices are still able to capture relevant structural changes but could benefit from several fine-tuning options to allow a clearer interpretation and consequently a better elaboration of policy advice. Relevant policy areas include international taxation, as suggested by the analysis of the FDI lightness index, but also employment and more generally development strategies of host economies.
In a volatile, uncertain, complex and ambiguous (VUCA) world, responses by governments to global shocks will vary in substance and rate of success. We argue that policymakers can make better decisions when high-quality evidence is incorporated into an evidence-based policymaking (EBP) process. To generate high-quality evidence for analysing shock events, researchers should use event analysis, a methodological approach for exploring research questions such as the timing, frequency and patterns of events and their antecedents and consequences. We discuss four types of research methods used in event analysis and their relative appropriateness for analysing different categories of events. In particular, we argue that one method – the event study – is well suited for analysing crises, i.e. shock events that involve high threat, short decision-making time and surprise. We conclude that understanding and using the tools of event analysis is key to successful EBP in a VUCA world.
Why does aggregate foreign direct investment (FDI) fall with distance? We conjecture that high trade costs adversely affect FDI entry decisions in a dynamic setting, even when controlling for previous export experience in foreign markets. We test this hypothesis using Japanese firm-level data for the period of 1995–2018, and find that the probability of FDI entry decreases with distance. We conclude that trade costs limit a firm’s ability to assess foreign market uncertainty. As a result, a firm may exit a foreign market before realizing the potential profitability and never establish an affiliate there. This result is highly relevant for policymakers, as it proves that trade liberalization and FDI facilitation policies may reinforce each other, resulting in a compound effect for both exports and FDI.
In the global economy today, there is both a supply-side push of large amounts of stimulus funding being directed at infrastructure investment and a corresponding demand-pull, with nearly all of the countries in the world committing themselves to the Sustainable Development Goals and to the transition to a net zero economy. In the energy sector, the pressure to rapidly increase the proportion of renewable capacity, primarily wind and solar, has created unprecedented opportunities for investment, but it also raises concerns about the availability of project finance investors to execute all of these projects, particularly in developing countries. We discuss three areas of future research that address the causes and remedies for such capacity constraints, namely, the structuring of project finance investment, demonstration effects, and the role of technological complementarities and leapfrogging in developing countries.
This study draws upon the institution-based view to examine the role of market and non-market institutional strategies of multinational enterprises from emerging markets (EMNEs) in shaping their decisions on outward foreign direct investment (OFDI) (decision to engage in OFDI and volume of investment). The proposed conceptual framework is tested on the OFDI decisions of listed Indian firms during the period 2008–2018. The results of random effects logistic regression and tobit regression provide robust evidence for the positive impact of institutional substitution and institutional signaling strategy on the decision to engage in OFDI as well as the volume of investment. An institutional borrowing strategy affects only the decision to engage in OFDI, whereas an internalization strategy does not help EMNEs while internationalizing. The study contributes to the literature on institutional voids and institutional escapism by identifying the strategies that facilitate overseas expansion. It adds to the EMNE literature, which has focused lately on explaining the role of non-market strategies in internationalization. The results of the study indicate the need for policy initiatives geared towards filling information voids, strengthening legal systems and development of credit markets.
The future patterns of foreign direct investment (FDI) are important inputs for policymakers, even more so during severe economic downturns, such as the one caused by the COVID-19 pandemic. Yet, there is neither empirical consensus nor significant ongoing empirical research on the most appropriate tool for forecasting FDI inflows. This paper aims to fill this gap by proposing an approach to forecasting global FDI inflows based on panel econometric techniques – namely the generalized method of moments – accounting for the heterogeneous nature of FDI across countries and for FDI dependence across time. The empirical comparison with alternative time-series methods confirms the greater predictive power of the proposed approach.
Countries attract foreign investors, “entrants”, to invest and venture by employing policy programmes and marketing strategies. Country attractiveness for foreign investors relates to international competitiveness. Instruments building a formal status, such as golden visas and citizenship, are used to attract individual foreign investors and their families. These are often cosmopolitan people, i.e. global citizens but also global diasporans. They contribute to the economy, ideas and transnational entrepreneurial ecosystems. These policy instruments are criticized partly due to missing legitimacy, partly due to concerns about geopolitics and international crime. However, diasporic investors manifest different motivations and commitments, making them particular. This study examines what kind of investor programmes are offered to different foreign migrant investors and whether they address diasporic ties. It presents a country comparison of investor policy pathways towards citizenship. It contributes to the literature on migrant investment and policymaking.
International business in the past century has largely been the domain of large multinational enterprises and banks, as well as small exporting and importing companies. The scope of international business activity has grown in recent years, and today there are many State-owned companies involved in international business activities, as well as financial investors rather than only industrial or commercial companies undertaking foreign direct investment (FDI). Government policy toward international business has largely been supportive since the 1990s, while concerns have arisen particularly in regard to the activities of State-owned enterprises and also the activities of non-traditional investors such as investment funds. To achieve the greatest benefits from FDI and trade, governments need to understand which companies are making the key decisions in global value chains and to collaborate in rule-setting and in guiding companies to pursue desirable activities and to limit non-business goal-seeking.
Global value chains (GVCs) are a powerful vehicle through which multinational enterprises (MNEs) can help address the grand challenges that humanity faces. But optimally utilizing GVCs for sustainability requires fundamental changes in corporate behaviour. In this paper we expound the concept of MNE economic power within GVCs and discuss needed changes for MNE business models to fill governance gaps. We debate the renewed role of public governance to promote social and environmental standards along GVCs and outline policies that governments should adopt to help MNEs and lead firms alter their business model.
As the green bond market continues to develop and assume a critical role as a post-pandemic vehicle for supporting a balanced economic rebuild and credible transition efforts, policymakers must reassess the current disclosure regime. This paper derives findings from Bayesian games to demonstrate that the prevailing labelling regime for green bonds is susceptible to the adverse selection problem; due to informational asymmetries, allocative inefficiencies arising from capital misallocation to inherently “non-green” bonds may ensue. To prevent the erosion of confidence in the market segment and support the potential of impact finance instruments to affect positive social and environmental change, this paper draws on established game theory frameworks to inform recommendations for policyled solutions to uphold the market’s credibility. These recommendations concern the integration of a regulatory infrastructure, a centralized ongoing audit under an “exogenously costly” regime and the introduction of a clearer course for legal recourse against issuers that mislabel bonds.
The United Nations Conference on Trade and Development (UNCTAD) has contributed during the last three decades to research and policy analysis on foreign direct investment (FDI), activities of multinational enterprises (MNEs), international production and the development impact of all three. In 2020 UNCTAD's World Investment Report (WIR) marked its 30th year. The report features the latest global investment trends and prospects, highlights the key emerging policy issues and dives deep into the fundamental themes of FDI and development. Through its policy analysis and recommendations over the past three decades, the WIR has helped define and redefine mainstream investment policymaking at national, regional and global levels. The World Investment Report 2020 presents an overview of three decades of international production. It coincided with the beginning of a new era for the global economy marked by COVID-19. The analysis describes how the pandemic accelerated pre-existing trends by affecting international production systems. Tougher competition for FDI -- especially in manufacturing, growing economic nationalism and the new industrial revolution make it more challenging for developing economies to participate in global value chains (GVCs) and thus require a new investment for development path.
We study cultural spillovers from multinational corporations (MNCs) to domestic companies in the information technology (IT) sector of Costa Rica. Using firm-level panel data for 2001–2011, we explore to what extent domestic firms’ female labour share increases as a result of business operations of MNCs. We find evidence of two channels for cultural spillovers from foreign direct investment (FDI) to domestic IT firms influencing higher shares of female employment: learning (imitation) effects through labour mobility, which allows former MNC employees working in domestic firms to apply skills and gender practices from their previous work experience, and demonstration effects with the presence of MNCs (through competition in the labour market), which include imitation of social norms and values of MNCs by local firms. No evidence was found for a relationship between backward linkages (purchases) of MNCs from domestic suppliers and female labour share. To promote greater participation by women in labour markets through FDI attraction, strengthening cultural spillovers would require implementing FDI promotion policies to (i) enhance the absorptive capacity of domestic IT firms, (ii) attract IT MNCs with greater potential to generate spillovers, and (iii) foster a favourable national investment climate for enhancing business interactions between IT MNCs and domestic IT firms.
This paper analyses the effect of foreign ownership on female employment using micro-level data from the Chilean Manufacturing Survey. Particularly, it examines whether foreign-acquired firms hire proportionately more female workers than domestic firms. To control for the possible endogeneity of the foreign acquisition decision, we use propensity score matching combined with a difference-indifferences approach. In addition, we compare firms operating in the same industry-year. Our results show that foreign ownership increases the share of female workers within the firm. One year after acquisition the share of female workers is 1.64 percentage points higher in acquired firms than in non-acquired firms, and this figure increases to 3.55 percentage points two years after acquisition. When we separate female workers into skilled and unskilled categories, we observe that the positive effect of foreign acquisition is present only for skilled women. One year after acquisition, the share of skilled women is 4.60 percentage points higher in acquired firms than in non-acquired ones, and two years after acquisition this figure increases to 6.63 percentage points. We also present evidence that foreign acquisition increases the share of skilled women only when the acquired firm was not an exporter before its acquisition, supporting Becker’s (1957) theory on taste-based discrimination.
