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

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  • Rajneesh Narula

    () (University of Reading)

  • André Pineli

    (University of Reading)

Abstract

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 Countries still rely on policies for which evidence is sparse, or no longer valid in an era of globalisation.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.

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  • Rajneesh Narula & André Pineli, 2019. "Improving the developmental impact of multinational enterprises: policy and research challenges," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 1-24, March.
  • Handle: RePEc:spr:epolin:v:46:y:2019:i:1:d:10.1007_s40812-018-0104-2
    DOI: 10.1007/s40812-018-0104-2
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    Cited by:

    1. Narula, Rajneesh & Van der Straaten, Khadija, 2019. "A comment on the multifaceted relationship between multinational enterprises and within-country inequality," MERIT Working Papers 035, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    2. Fragkiskos Filippaios & Fatima Annan-Diab & Amir Hermidas & Charikleia Theodoraki, 2019. "Political governance, civil liberties, and human capital: Evaluating their effect on foreign direct investment in emerging and developing economies," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(7), pages 1103-1129, September.

    More about this item

    Keywords

    Multinational enterprises; Economic development; Developing countries; GDP growth; Spillovers; Public policy;

    JEL classification:

    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O24 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Trade Policy; Factor Movement; Foreign Exchange Policy
    • D62 - Microeconomics - - Welfare Economics - - - Externalities

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