This paper revisits an earlier contribution (Narula and Dunning 2000)
and considers how economic globalisation has changed the nature of the
MNE, MNE motivations, the MNE subsidiary and the modalities by which
they interact with domestic economic actors. Most developing countries,
however, have responded reactively. We discuss how the opportunities and
challenges for developing countries in following an MNE-assisted
development strategy have changed over the last decade.
The growing share of industrial activity owned and controlled by MNEs does not always result in a proportional increase in development effects, because individual MNE establishments have different potential for externalities. Concatenation is important: when stage-inappropriate MNE activities are established, crowding-out or regulatory capture is a likely outcome. We highlight the need for systematically linking MNE and industrial policies, but differently than in the import-substitution era. Attracting the ‘rights kind’ of MNE activity remains important, but the greater heterogeneity requires more customisation of policy tools. Lastly, we warn of the dangers of underestimating the social and political costs of structural adjustment and rapid institutional change associated with globalization.
keywords: FDI, spillovers, industrial policy, governments, development, WTO, globalisation, developing countries, liberalisation.
JEL: F23, O14, O19
UNU-MERIT Working Papers ISSN 1871-9872