Parental Supervision: The New Paradigm for Foreign Direct Investment and Development

by Theodore Moran

Overview

Parental Supervision amplifies the research Theodore Moran first presented in Foreign Direct Investment and Development (1998), assessing the opportunities and dangers that foreign direct investment may present to the growth of developing countries. Moran uses almost 50 percent more case studies than the earlier work to examine two types of foreign investments: (1) those that are tightly integrated into the parent firm's strategy and (2) those that are hindered by joint-venture and domestic-content requirements. The study is a comparison between these two types of foreign operations how backward linkages to local suppliers, operations of local affiliates, and the spillovers and externalities in the host economy differ from one type of foreign operation to the other. In tightly integrated networks, not only is the performance of local affiliates superior and upgraded more continuously, but also, surprisingly, the backward linkages from the affiliates to local suppliers tend to be larger and more robust. Moran reviews contemporary efforts to measure the impact of simultaneous trade and investment liberalization on host country welfare, finding that the magnitude of both the benefits and the costs may be far greater than conventional wisdom suggests.

Product Details

ISBN-13:	9780881323139
Publisher:	Peterson Institute for International Economics
Publication date:	08/01/2001
Series:	Policy Analyses in International Economics , #64
Edition description:	New Edition
Pages:	88
Product dimensions:	6.00(w) x 9.00(h) x (d)
Age Range:	18 Years

About the Author

Theodore H. Moran, nonresident senior fellow, has been associated with the Peterson Institute since 1998. He holds the Marcus Wallenberg Chair at the School of Foreign Service in Georgetown University. He is the founder of the Landegger Program in International Business Diplomacy at the university and serves as director there. He also serves as a member of Huawei's International Advisory Council. From 2007 to 2013 he served as Associate to the US National Intelligence Council on international business issues.

Table of Contents

	Preface	ix
	Acknowledgments	xiii
	Introduction	1
1	The Product Cycle Model of Foreign Direct Investment, Multinational Corporate Strategy, and Parent Control	3
2	Operations That Fit into the Product Cycle Model of Control and Supervision	7
	Characteristics of the Affiliates Themselves	7
	Backward Linkages	15
	Spillovers and Externalities	24
3	Operations That Do Not Fit into the Product Cycle Model of Control and Supervision: Investments with Domestic-Content, Joint-Venture, and Technology-Sharing Mandates Imposed by the Host	31
	Characteristics of the Affiliates Themselves	32
	Backward Linkages	38
	Externalities	40
4	Implications for Measuring the Impact of Foreign Direct Investment on Development	41
	The Dangers of Mismeasuring the Impact of Foreign Direct Investment	41
	Appraising the Impact of Foreign Direct Investment on Host Countries Within the Context of Endogenous Growth Theory	44
	Estimating the Impact of Rationalization and "Derationalization" of Production by Multinational Firms Across Borders	49
	Assessing the Spread of Backward Linkages from Foreign Affiliates to Local Suppliers	53
	Evaluating Spillovers and Externalities from Foreign Investors to the Host Economy	55
5	Policy Implications for Host Authorities	61
	Implications for Host Country Policies Toward Foreign Direct Investment	61
	Implications for Host Country Policies Toward Trade-and-Investment Negotiations	63
	References	67
	Index	75
	Tables
Table 4.1	Alternative estimates of the impact of investment liberalization	58
Table 5.1	Schematic comparison of foreign affiliates closely integrated into the parent's global sourcing network with foreign affiliates that are not	62