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"Narula, Rajneesh"
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Policy opportunities and challenges from the COVID-19 pandemic for economies with large informal sectors
In the developing world, the informal economy can account for as much as 80% of the population. I focus on the urban component of informality, where both informal employment and informal enterprises are especially vulnerable to the pandemic-induced economic shock. I explain the complex nature of informality, some of the reasons for its persistence and its interdependency with the formal economy, especially in the manufacturing sector, through global value chains (GVCs). Large firms (whether MNEs or domestic firms) sub-contract considerable activity to informal enterprises, but this is precarious in character. I suggest the crisis provides the circumstances for greater active engagement with informal actors, by placing informal enterprises on a par with formal firms within industrial policy. I propose integration and registration, as opposed to formalisation, and the provision of state support without taxation. The role of the state is also crucial in matchmaking, creating incentives for GVCs to engage with informal actors systematically, and to reduce the transaction costs for informal actors in such engagement. These actions are likely to provide benefits in the longer run, even if they prove costly in the short run.
Journal Article
Innovation in and from emerging economies
This article argues that innovation in and from emerging economies is largely shaped by the challenges of sustained catching-up with the advanced economies. Just as firms and industries are constantly seeking to upgrade their technological and organizational capabilities, so too are their societies reconfiguring their institutions and networks to improve their knowledge resources. Such a co-evolutionary process requires IB scholars to draw on interdisciplinary work from the innovation and development literature in order to reconsider the key drivers of innovation at multiple levels within these economies. Innovation is not just limited to technological activities but includes organizational and transactional improvements, and is largely a process of recombination of local and imported knowledge, shared through multiple forms of collaboration. This can redefine the FSAs of local and foreign firms, often shaped by the strategies of domestic public and private actors. Simultaneously, policymakers need to develop the appropriate institutions needed to underpin R&D, training, standards, and knowledge coordination. MNEs play unique roles as instigators of innovation, as conduits for new knowledge, and as beneficiaries themselves, via their own recombination capabilities.
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The Viability of Sustained Growth by India's MNEs: India's Dual Economy and Constraints from Location Assets
This paper considers the longer-term viability of the internationalization and success of Indian multinational enterprises (MNEs). We apply the 'dual economy' concept (Lewis, Manch Sch 22(2):139–191, 1954) to reconcile the contradictions of the typical emerging economy, where a 'modern' knowledge-intensive economy exists alongside a 'traditional' resource-intensive economy. Each type of economy generates firms with different types of ownership advantages, and hence different types of MNEs and internationalisation patterns. We also highlight the vulnerabilities of a growth-by-acquisitions approach. The potential for Indian MNEs to grow requires an understanding of India's dual economy and the constraints from the home country's location advantages, particularly those in its knowledge infrastructure.
Journal Article
Enforcing higher labor standards within developing country value chains
The 2013 collapse of the Rana Plaza building in Dhaka, Bangladesh, led external stakeholders to insist on higher labor standards in apparel global value chains (GVCs). Stakeholders now expect MNEs to take ‘full-chain’ responsibility. However, the increased monitoring and enforcement costs of a large network of suppliers have been non-trivial. MNEs instead implement a ‘cascading compliance’ approach, coupled with a partial re-internalization. Elevated costs are further exacerbated in developing countries where the informal and formal sectors are linked, and cost competitiveness greatly depends on this duality. Monitoring actors in the informal sector is difficult, and few informal actors can achieve compliance. GVCs have therefore reduced informal sector engagement by excluding non-compliant actors and investing in greater automation. By seeking to strictly enforce compliance, MNEs are attenuating some of the positive effects of MNE investment, particularly the prospects for employment creation (especially among women), and enterprise growth in the informal sector. I discuss how these observations might inform other cross-disciplinary work in development, ethics, and sociology. Finally, I note implications for IB theory from the disparities between the ownership, control, and responsibility boundaries of the firm.
Journal Article
An extended dual economy model
PurposeThe purpose of this paper is to introduce a new theoretical framework called the “extended dual economy model”. Based on the seminal work of Lewis (2014), the author uses it to explain the sectoral specialisation of home countries and their firms and MNEs.Design/methodology/approachThe paper is multi-disciplinary and entirely conceptual, with cool ideas but very few numbers and equations.FindingsEmerging economies exhibit a “duality” in their economic structure that reflects itself in two largely different sets of location (L) characteristics. They are simultaneously home to both “traditional” sectors, which are resource and labour intensive, as well as “modern” sectors, which are knowledge and capital intensive, each of which can be analysed as having two sub-economies. These different sets of location advantages shape the firm-specific advantages of EMNEs and their FDI.Research limitations/implicationsThis analysis helps to underline what shapes the ability of home countries to “emerge”, and the ability of their firms to grow and their MNEs to become internationally competitive. Few EMNEs can thrive in international markets without concurrent growth in their domestic markets. Maintaining the appropriate location assets to optimally support both types of sectors is costly. Each type of sub-economy requires different kinds of support sectors, infrastructure and policies, with little overlap. Weaknesses in its home country L advantages hinder the long-term competitiveness of their EMNEs.Practical implicationsFew EMNEs can thrive in international markets without concurrent growth in their domestic markets. Weaknesses in its home country L advantages hinder the long-term competitiveness of their EMNEs.Originality/valueThe extension of the Lewisian dual economy model allows a number of interesting new insights because it allows us to consider firms, non-firms, informality and the bottlenecks associated with promoting knowledge-intensive sectors in a globalised world. It emphasises structural change, and the need to manage pathways and effectively channel growth.
Journal Article
International Business and the Eclectic Paradigm
The eclectic paradigm has arguably become the dominant theoretical basis in the study of FDI, multinational corporations and internationalisation over the last two decades. The contributions to this volume evaluate the eclectic paradigm in the global economy and its validity as a theoretical basis to understand developments such as economic globalization and the subsequent growth of global and alliance capitalism.
John Cantwell is Professor of International Business at Rutgers University, USA (from 2002), while on leave of absence as Professor of International Economics at the University of Reading, UK. His main research areas are the analysis of corporate technological change and international business. He is the author of Technological Innovation and Multinational Corporations (1989). Rajneesh Narula is Professor at the Department of International Economics and Management (INT) at the Copenhagen Business School, and at the Centre for Technology, Innovation and Culture (TIK), University of Oslo.
eBook
From the editor: On writing a perspectives article—what they are, what they are not (and what they should be)
I offer some guidelines on what is expected of a perspectives paper, both more generally, and specifically for this journal. A perspectives paper is normally motivated by an epiphany (data-driven, or conceptual) that a dominant scholarly narrative needs to be reconsidered. It should be the role of the author to convince her sceptical audience that this novelty does indeed reflect either an evolving meta-narrative within the field (or adjacent fields), an altered narrative within society at large, or the advent of a fresh socio-economic phenomenon. I highlight the differences between different paper submission alternatives for this journal: commentaries, review articles and perspectives papers. I also offer some reflections—based on my experience as an author and an editor—on what I consider to be challenges to being truly objective in academic publishing.
Journal Article
Integrating host-country political heterogeneity into MNE–state bargaining: insights from international political economy
The international business (IB) literature has emphasised the heterogeneity of firm strategies in shaping MNE–state bargaining, but largely ignored the heterogeneity of states. In contrast, the international political economy (IPE) literature provides a more nuanced consideration of state strategies and their economic and political priorities. We seek to address this oversight by making two related contributions. In the context of MNE–state bargaining, we first discuss how differences in political systems and the political and economic objectives of states may affect their negotiating stance with MNEs. We consider the impact of changes in the balance of state objectives by considering how much importance governments assign to improving the welfare of its broader population, relative to how important they are concerned with the “private benefits” that accrue to the political elites. This enables us to add micro-foundations to the characterisation of the state. Second, we apply a Nash bargaining framework to MNE–state negotiations that vividly captures the relative bargaining powers of the MNE and the state, including how “outside options” available to these two actors can influence the shape of actual bargains. We discuss the implications of these two contributions for future research.
Journal Article
The multinational enterprise, development, and the inequality of opportunities: A research agenda
The potential of multinational enterprises (MNEs) to accelerate economic development and reduce inequality has been recognized since the industrial revolution, when states sought to actively engage foreign capital in industrialization. Over time, the MNE–state compact has waxed and waned in significance due to (geo-)political developments, shaped in part by how the economic surpluses of foreign capital were distributed between domestic actors. Government policies matter as to how they prioritize international competitiveness relative to domestic inequality reduction. The contemporary rise of within-country income inequality alongside increasing globalization has drawn attention to the causes of inequality (including the activities of MNEs). Scholars in development studies have examined the underlying causes of increasing income inequalities through the lens of inequality of opportunities. We discuss how adopting this lens could advance our understanding of how MNEs influence inequality directly, as well as in interaction with the policies of the state. Subsequently, we propose a research agenda, taking into account micro-, meso-, and macro-level perspectives. In our discussion, we explicitly highlight that the MNE–state compact is dynamic, continuously changing with the evolving political and socio-economic landscape. MNEs can have an impact on inequality of opportunities, contingent on the nature of their engagement with states and other stakeholders.
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