Global Political Economy
Impacts to Corporate
and Government Strategies
Globalization has long since reached the area of politics, especially when it has influenced world economy. As an Economist the optimism that greeted the fall of the Communism has proved to be short-lived. The hope was for an acceleration of progress towards a liberated world economy, in which it would benefit world growth by giving it free rein. Instead, the removal of the common threat of the Soviet bloc has had the perverse effect of releasing pent-up economic rivalry in the form of increasingly bitter trade fights. “The persistent failures of the General Agreement on Tariffs and Trade (GATT) negotiations, combined with symptoms of a world of adversarial trade blocs, suggest a new mood of national self- interest.”[1]
“Trade friction is caused in part by the fact that the pace of building an increasingly interdependent world economy on the investment account is continuing at an unprecedented rate. Mobile investment and intensifying global competition affects the source and nature of the associated trade flows. How to capture more of the benefits within a country has become a pressing issue for government. What national policies can induce firms - both domestic and foreign - to invest for production and exports and thereby increase national wealth? Within the last two years, this question has emerged centrally in the political debate in Canada, England, and the USA and more recently in Germany. There, the Solidarity Pact talks among politicians, trade unions and industry have been described 'ensuring the competitiveness of Germany as an investment location in the 1990s'. Regional issues are taking a back seat in the national debates. The same debates have taken place in many developing countries as a prelude to adopting far-reaching policies of liberalization and privatization.”[2] 0
“Yet, government’s responses to international economic developments are inherently ambiguous. They want the benefits of investment and are increasingly prone to intervene to increase their share, but fear the consequences when other nations do the same. They also fear possible losses of national sovereignty. Margaret Thatcher saw no inconsistency in simultaneously espousing the cause of market forces and opposing European integration on issues that threatened Britain's ability to determine its own future. Those fears are most acute in high-technology industries, such as aircraft, semi-conductors, supercomputers, high-definition television and the like, regarded by many as crucial for their national security and for the strength of their national industries”[3] 2. The aim is to illuminate the sources of the friction and risk and to suggest to firms that they should increase their say in influencing the government policy.
Is the world moving towards the 'ideal' state of a global economy in which growth is fuelled by close economic interdependence among the leading nations in trade, investment and co-operative commercial relations combined with relatively little restriction on cross- border transactions or discrimination against foreign-owned entities? There are two parts to this depiction of an “ideal”: economic interdependence and harmonization of policy among leading nations. If one looks only at the first part, the evidence might be used as support for Ohmae's[4] 3 claim that strategy should be “based on the presumption of a 'borderless world' and that governments' powers to dictate terms to the market are in terminal decline.”[5] 5.
First is the growth of the output from the foreign investments. “At some point during the 1970s, the output from assets located in one country but owned and controlled in another exceeded the volume of world trade for the first time. That output is highly concentrated. Just 420 of the largest of the roughly 35,000 multinationals account for over half of the total output.”[6] 7.
A second indicator is the growth of both “strategic alliances among the multinationals and of other non-equity forms of collaboration with local firms. Alliances can change the structures of competition and challenge the powers of national and regional competition regulations: the economic unit of competition can become wider than the defined by the legal boundaries of a single firm. Moreover, the constantly evolving bargains within an alliance underscore the dynamism of the race to acquire resources. As one study concluded, companies that are confident about their ability to learn may even prefer some ambiguity in the alliance's legal structure. Ambiguity creates more potential to acquire skills and technologies.” 9.
For the purposes of this argument, one can depict the evolution of strategy in many multinationals as a combination of market and resource seeking policies occurring within regions where there are efficiencies to be gained by specialization of production and trade in products. Simultaneously, they are building world-scale efficiencies in such functions as technology, information systems and their trade across regional boundaries are growing in the intangibles of knowledge and finance.
The implication is that some multinationals at least have already developed their strategies in ways that provide them options for responding to the possible trade wars among the emerging trade blocs of NAFTA, EC and in East Asia. The implication is also that they are becoming much harder to control within any one nation.
Given that investment is one of the keys to economic growth, governments are motivated to seek as many sources of fresh investment as possible. “Governments have been putting out the welcome mat to multinationals and fattening the incentive packages on offer to bias firms location decisions. Within Europe, there are constant contests both among nations and among regions within nations to attract mobile wealth-creating capital. More generally there has been a general liberalization of investment policy in many, especially developing, countries. And the pace of liberalization has accelerated. Of 82 policy changes adopted by 35 countries during 1991, 80 reduced restrictions on foreign investors. Furthermore, 64 bilateral investment treaties for the promotion and protection of foreign direct investment FDI were signed during the first 18 months of the 1990s, compared with 199 such treaties signed during the 1980s.” 10. As a result the privatization and de-regulation of communications as well as the financial markets has also helped to seek as many fresh investors as possible and they helped extend the sense of greater mobility of critical resources.
One needs, however, to put the multinationals' investment contribution into context. Inward FDI -- a form of transfer of world savings -- is of only marginal proportion in total national capital formation. There is, of course, wide variation in this figure. Some of the poorer nations, in Africa especially, attract virtually no foreign capital. At the other end of the scale, Singapore relied on the multinationals for over 35 percent of its capital formation during the period 1986-89. In the same period, the figure was over 12 percent for the England and 6.7 percent for the USA. In almost all countries the figures have risen significantly above the levels in the early 1970s. Though relatively small in value, the composition of the inward investment can be crucial. The England, for example, relies on foreigners for infusions of new technologies in such industries as electronics, consumer electronics and automobiles.
Enhancing the investment function by promoting inward foreign direct investment FDI is, however, a two-edged sword. It can at times create growth and add needed skills, but it can also hinder growth 11. Moreover, there are growing concerns about the trade consequences. Many foreign-owned affiliates also import much more than local firms. For example, in the USA, they import twice as much per worker in the same industry, thus partially or wholly offsetting the desired export gains 14. Government persistence in supporting local, high technology players in Japan, Europe and some developing countries like South Korea, Taiwan and Brazil has sparked serious trade frictions with the USA. The reasons are not hard to find. These are industries where the returns from technical advance create beneficial spill-over effects in related industries and create new barriers to entry that can protect first movers. These are also industries where a nation's competitive position is clearly not determined by factor endowments. Instead, position is created by the strategic interactions among firms and their home governments and among them and foreign firms and governments.
Oligopolistic competition and these strategic interactions have effectively replaced the invisible hand of market forces and 'violate the assumptions of free trade theory and the static economic concepts that are the traditional basis for US trade policy' 16. National policies of support promote local welfare when they provide spillover effects to local related industries. They can also promote global welfare, but only in the rare cases when they also provide spillover effects in other countries. Managers need to pay attention to these academic debates, because there are clear signs that the Clinton administration is responding to them and starting to put in place more directly interventionist policies that might provoke retaliation elsewhere. Moreover, there is a real danger that these responses will extend to other industries, as in the current disputes over countervailing duties, tax policies for foreigners and the rules for public procurement.
National differences in the rules governing competition distort and impede trade, even in high-technology industries are characterized by a broad dispersion of manufacturing around the world and a separation of the location of research from manufacture 17. The impediments are so deeply embedded in national structures that attempts to negotiate their removal meet stubborn resistance, as the faltering progress of the US-Japan Structural Impediments Initiative talks indicates. Japan has acceded to gaiatsu (pressure from abroad) on those agenda items, such as infrastructure spending, where it sees greater gains than for the USA. But Japan has dragged its feet on the issues of loosening keiretsu trading relationships and ending exclusionary business practices, because it sees no national benefit.
The areas of diplomacy are represented by the following”
As diplomacy shifts from competition for power from more territory towards a competition for wealth as a means to gain power, multinationals have a more direct influence on the conduct of inter-governmental relations. Connecting all the three sides of the triangle are interlocking bargains that together shape the operating rules of the game 18.
The impact on individual states depends on the relative importance of international and purely national transactions, the types of goods and assets traded and the forms of agreement created to support the state's objectives. The great variation of national size and resource, state of development and so on suggest that the outcomes are likely to vary enormously. Growing interdependence does not mean a convergence of outcomes, but diversity. This adds pressure on managers to understand the fine-grain of the interplay of forces in each region and to ensure that their options for response as indeed as flexible as some now claim them to be.
diplomacy can be seen at work among the East Asian economies. Led by Japanese firms, East Asian economies are becoming more interconnected, even without a formal trade pact. The Asian regional developments are clearly being influenced by the extent to which Japan can export its ideological preference for lending the invisible hand a bit of administrative guidance to other, similarly inclined neighbours.
Japanese firms enjoy official support from two sources. One is through the operations of the Japanese International Development Organization, set up in 1989 by the Keidanren 19, with one-third of its capital supplied by the government. This agency provides financial assistance for investment in developing countries, especially in Asia. The other source is the Japanese aid program that concentrates on infrastructure projects and provides over half of all aid to ASEAN countries and to China. Japanese firms won over a third of the aid contracts in the year up to March 31, 1992. The link between public and private capital is well illustrated by China's Liaoning Province, where Japanese investment was modest until 1988, when $145 million was pledged to finance a dam. 'This spurred a flood of private cash. The biggest project was a $155 million cement plant... and, according to study by A. T. Kearney, a management consultancy, half of the foreign investment in Liaoning now comes from Japan.' 21. The implications for corporate strategy are clear and at odds with much recent corporate behaviour, for many US firms have reduced, relatively or absolutely, their investments in the region since 1985.
A further manifestation of area of diplomacy is that when governments clash in one industry, the repercussions can be felt in others. One example can serve to make the point. While MFA IV 23.
These increasingly important manifestations of a new order are drawing attention to the need to distinguish productive assets that are created from those that are natural endowments 24. Created assets are primarily in the form of human capital -- the stock of knowledge, technological and organizational capacity, infrastructure and governing policies. Endowments primarily land, mineral resources and labour -- remain immobile, but are of decreasing importance in determining outcomes. Richly endowed countries, like the old USSR or Zaire, can remain relatively poor if they fail to enhance their human capital as fast as competitors. In other words, policy makers need to concern themselves with the inputs to future competitiveness, not just react to outcomes after the event.
Some policy makers have well understood the new realities. As Governor Park of South Korea's Central Bank put it, 'don't listen to 'comparative advantage' advice. Whenever we wanted to do anything the advocates of comparative advantage said 'we don't have comparative advantage'. In fact, we did everything we wanted, but whatever we did we did well.' 25. Much the same could be said for the post-war development of Japan. The state, it would seem, cannot let market forces work alone if it is to help ensure that its constituent firms grasp the lightning rod of innovation. That is precisely what the debate is now about in the USA and Europe.
Consider the issue of labour. It used to be thought that the possession of a large pool of low-cost labour conferred advantage on a nation. Today, direct labour is becoming a relatively minor part of the total cost of production in many industries. In electronics it can be as low as 3 percent, and according to a recent IFC study, even in standardized automobile components (coil springs, piston rings and valves) companies report that direct labour costs are only 10-15 percent of total manufacturing costs and falling 26. Similarly, indirect labour is falling as a proportion of total costs. The old argument is losing its power and the issue is focused on the possession of trained labour and how skills in one country can be transferred to another by firms, rather than by national educational policies. For example, GM and Ford have trained the local workforce as part of their successful transfer of advanced engine manufacture to Mexico.
The same issues affect the shifts of location among developed countries. There is much evidence that, within Europe, inward investors are avoiding locations of relatively low skill and eschewing the cash advantages of investment incentives. Instead, they prefer locations where they can have ready access to a pool of highly trained labour, even though the short-term costs may be higher. The argument is that the ability of the workforce to upgrade to the demands of next-generation products will determine how much total long- run costs can be lowered to enhance the durability of the firm's competitiveness.
Increasingly, national competitiveness is coming to depend on the abilities of people and firms to innovate -- to create new products and services, to lower the real costs of supply by increasing productivity and to build relationships with customers at home and abroad -- and of society to organize its affairs effectively. The innovative assets are a central part of the created assets of a state. They are intangible and primarily the property of firms, especially in those sectors where the costs of research exceed the capacity of individuals or, in some cases, even governments to fund. This means that firms, not the state, have the right, within the constraints of the law, to exploit the assets wherever and however they choose. Rising scale for innovation means that the multinationals will increasingly provide the well- spring for progress, the outcome of which is measured in terms of trade flows, income levels and income differentials.
It is perhaps curious that Michael Porter 27 ignores many of these developments in his recent, influential book. He gives little weight to the role of the multinationals or the multilateral agencies and ignores the effects of inter-state bargaining. He seems to regard domestic resource creation as the dominant determinant of competitiveness, considering global influences as little more than interesting additions to his domestic 'diamond' of factors. Indeed, recent analysis has demonstrated that Porter's implied policy prescriptions are muddled and sometimes inappropriate 28. Part of the difficulty is that Porter, like many government officials, assumes firms are conditioned by local factors before they go abroad. He undervalues the intangible advantages multinationals possess in terms of their ability to lower the transaction costs of the global market and thus work towards integrating country-specific factors as they transform their internal resources.
Moreover, the imperatives of competition now mean that competitors in a global industry more closely resemble one another. Previous notions of fundamental differences in terms of enterprises' national origin -- US firms behave differently from Japanese ones, and so on -- have to be revised 29. The implication is that a more productive way to address the issues may be to start from a clearer depiction of the forces in the international political economy and then work 'backwards' to consider how specific national conditions fit into the whole and are shaped by the changing motivations of the key investors. Only then might one be able to see the causes of the diversity of the outcomes.
There are immense difficulties to be overcome if governments are to shift from a static, defensive view and come to grips with the global dynamics. They will have to understand that the interplay of regulatory and competitive forces impacts on different industries in different ways. Thus a general policy that may make economic sense for one industry may be disastrous for another. There is much evidence from around the world that governments are finding it extremely difficult to co-ordinate their macro and micro policies in ways that provide them adequate access to all the dynamic sources of future competitiveness. Short-run domestic political agendas can deny them the commitment to build for longer run strength and thus preserve and perhaps magnify the present sources of friction.
Is it possible to hope for a convergence of views and policies that will lessen the risks that frictions create? Globalization does not necessarily mean governments lose control of their economic destinies: they must revise their approaches to capturing the benefits from new, innovative sources of advantage within their own borders. Even though the domestic organization, both private and public, controls most of the ingredients needed to foster greater created sources of advantage, no state today can be wholly self-sufficient in commanding all the resources it needs. The multinationals provide complementary, but not substitutive, resources that can accelerate progress. There are new bargains to be struck.
State/multinational relationships are necessarily based on bargaining, for which the rules are in constant flux, not just because of competition but also because of change in states' expectations. 'A state has objectives that are multiple... It wants to be efficient and competitive and to preserve social peace and the cohesion of the state with society. It wants autonomy and the freedom to choose its own path to economic development and access to advanced technology and overseas markets' 30. Success in managing these domestic dilemmas may be a necessary condition for progress, but is not a sufficient condition for managing the wider web of relationships in the international economy.
A central issue is the extent of integration of policy, both within a country and across borders. One recent study concluded that 'the competitiveness of a country rests both on the ability of its firms to organize and utilize its own assets efficiently and also on the ability of Government to ensure that the markets in which firms compete are the least distorted. In order to achieve these objectives, Governments need to restructure their own internal systems of management so as to gain the maximum benefits from an integrated system of governance' 31. The logic of the multinationals' expansion calls for greater and deeper integration nationally and internationally, including harmonization of a diverse agenda ranging from tax and competition policy to common environmental standards. National governments are less sure about the benefits of integration beyond their own borders.
What then is the role for multinationals in the bargaining? Can they afford to wait for governments to sort out new rules, domestically and internationally? Or should they actively intervene in the debates? These are questions attracting increasing attention, though the answers are diverging according to the position of individual firms. Some seem unwilling to engage in the debate, for fear of attracting criticism that they are intervening in politics. Others openly espouse the cause of greater liberality in the rules for managing cross-border transactions of all kinds. Yet others are busily lobbying government for greater degrees of protection.
Much of the response has to do with the kind of business involved. Those American managers whose international business is based primarily on FDI have tended to greet the debate with 'a big yawn' there is, however, an added consideration affecting the response: the competitive strength of the business. Those who are relatively weak are more prone to invoke the support of home or regional government 34. Moreover, Philips successfully argued for European price protection for video tape recorders to maintain inefficient local production. The extra margins awarded to the Japanese had the perverse effect of adding to their cash-flow capability to fund the development of next-generation products faster than the protected Europeans could achieve.
To whom then should governments listen? The evidence from many industries indicates there is a growing divergence in positions taken by leading EC multinationals in responding to shifts in global competition and rationalization. There is a dilemma in the sense that industry's 'voice' in the debate is likely to be one-sided. Weak firms are much more vociferous in lobbying both their national governments and Brussels than are most of the strong players. Strong leaders in investment-intensive industries have been relatively silent, reflecting perhaps their confidence and sense of indifference to changes in trade policy. Few have gone as far as British Petroleum, which stated in 1990 that 'as an international company, BP's commercial success is crucially dependent on ... the maintenance and enhancement of the GATT-based multilateral trading system'.
If firms fail to rise to the challenge of acting more as diplomats and continue to act on the basis of short-run perceptions of shareholder requirements, they may provoke policy responses in the West that are the opposite of longer run shareholder interests. The short- term debate, especially as it affects the workings of the capital markets, cannot be excluded from the debate. But the issue of time perspective in managing adjustments in a turbulent global economy introduces further dilemmas for states and firms alike. Though multinationals (and indeed the official position of Brussels) may in general resist protectionism, there are so many special cases of weakness, especially in trade-oriented industries that the fears of a 'Fortress Europe' developing selectively may prove to be justified. Precisely the same effect could develop in NAFTA and in East Asia.
All of the foregoing suggests at least two alternative scenarios for future development. The pessimistic scenario is that weaker Western firms will continue to be tempted to bargain for political solutions for their troubles. The effect might be to add further muddle to an already confused set of signals to government at regional and nation levels. If, simultaneously, their governments preserve out-dated notions of static comparative advantage, it is unlikely that North America and Europe will pay sufficient attention to building jointly the created assets needed for future competitiveness.
The more optimistic scenario is that the 'silent majority' of strong multinationals will have a crucial, and more overt, role in nudging governments towards adopting policies that more appropriately reflect the present competitive realities. Should that happen, in developing and developed countries alike, we might see faster progress towards the twin 'ideal' of a liberalized global economy with growing economic interdependence matched by moves to erode or even eliminate domestic distortions to the terms and conditions to operating across borders.
Of the many friction planes that could upset the co-operative bargaining needed in this optimistic scenario, the impact of FDI and further economic interdependence on welfare, both within and across countries, stands out as a cause of dangerous instability. Multinationals are not the benign engines of growth the United Nations is now suggesting. The growing concentration of investment flows within the 'triad' markets of the USA, Europe and Japan -- for quite understandable competitive reasons -- affects the international division of labour and makes it more difficult for latecomer countries to break into the charmed circle of development. The expected rapid growth of population in poor countries, shown in Exhibit 5, is storing up trouble for the next generation. Already, the phenomenon of 'economic refugees' is causing trouble on some frontiers, not least Germany's, and could add further pressures for states to strengthen their policies of national self-interest. Even within countries, the wealth effects of inward FDI are skewed in their distribution. Wholly market-based responses to competition do not necessarily promote social justice.
It is perhaps the sheer pace of change that makes it so hard for many states develop the administrative capacity needed to manage the multiple dimensions of the task simultaneously. How to train officials to comprehend the new realities adequately and to abandon old shibboleths? How to build internal resources as fast as competing states? How to harness the multinationals' skills and resources in durable bargains? Very few nations have the political will to build indigenous resources ahead of demand, as South Korea has done in its long sustained policies of education, technology enhancement and institution building. Yet even South Korea is finding that, to maintain its momentum of growth, it has to change and accord foreigners a greater role than hitherto.
If the difficulties of creating greater policy integration at home are serious, they are immense at the international level. The global economy needs a strong international polity that can foster much greater clarity, consistency, credibility and predictability in policy development. Progress will only be made possible by strong states that understand the new competitive realities and that are prepared to develop the needed new resources. The markets alone are unlikely to assist that process.
To deal with these intractable problems more coherently, a stronger sense of partnership between firms and governments is needed. Both need to adjust their behaviours to understand the other side better. Because they cannot make forecasts to choose among the possible scenarios -- that would defeat the purpose of making scenarios -- managers thus need to pay increased attention to the 'mentalities' of government, to be alert to indicators of their emerging policy responses in a post-Ricardian world and to calculate how action in other industries may affect them for good or ill. To maintain a narrow perspective on ones own products, markets and proximate competitors is to take undue risks. Firms cannot afford to ignore their diplomatic role in influencing how governments determine effective policies that will influence the attractiveness of any one location for investment. Failure to confront the tensions and frictions of conflicting perspectives will serve to worsen the fears of trade wars and impede the recovery of the global economy.
0 For a summary of these developments, see John M. Stopford and Susan Strange, Rival States, Rival Firms, Cambridge: Cambridge University Press, 1991.
1 The most eloquent statement of the threat to one nation from other governments' interventions in high-technology industries is provided by Laura Tyson, Who's Bashing Whom? Trade conflict in High-Technology Industries, Washington: DC, Institute for International Economics, 1992.
2 For an excellent summary of the theory and economists' subsequent modifications, see R. Findlay, 'Comparative Advantage', in The New Palgrave: The World of Economics, London: Macmillan, 1991.
3 K. Ohmae, The Borderless World, New York, Harper Business, 1990.
4 This sense that economic determinism was eroding government power was foreshadowed by Raymond Vernon in his classic treatise, Sovereignty at Bay, New York; Basic Books, 1971, though Vernon later modified his position.
5 The rich economic literature on this subject has been ably summarized by Richard Caves, Multinational Enterprises and Economic Analysis, Cambridge, MA: Cambridge University Press, 1982, and by John Dunning, Multinational Enterprises and the Global Economy, Reading, MA: Addison-Wesley, 1993, among others.
6 For details, see John M. Stopford, Directory of Multinationals, London, Macmillan, 1992.
7 One exception is John Cantwell (ed.) Transnational Corporations and Innovatory Activities, United Nations Library on Transnational corporations. London: Routledge, 1993
8 G. Hamel, Y. L. Doz and C. K. Prahalad, 'Collaborate with your competitors - and win', Harvard Business Review, Vol. 67, Jan.-Feb., 1989, p.139.
9 C. A. Bartlett and S. Ghoshal, Managing across Borders, Boston, MA: Harvard Business School Press, 1989. For equivalent evidence that few multinationals have become 'global' in all functions, see, A. J. Morrison et. al. 'Globalisation and regionalisation: which way for the multinational?', Organizational Dynamics, Winter, 1990, pp. 17-29.
10 United Nations, World Investment Report 1992: Transnational Corporations as Engines of Growth, New York, United Nations, TCMD, 1992, p.3.
11 For some data from developing countries to indicate that as much as 30 per cent of foreigners' investment projects can inhibit growth, see D. J. Encarnation and L. T. Wells, Jr. 'Evaluating foreign investment' in T. H. Moran (ed.) Investing in Development: New Roles for Private Capital?, Oxford: Transaction Books, 1986.
12 Paul Krugman, The Age of Diminished Expectations, Cambridge, MA: MIT Press, 1990, p. 127.
13 Cited in the Financial Times, 29 May, 1990.
14 For popular and respected views, see, for example, Robert Reich, The Work of Nations, New York: Knopf, 1991, and Lester Thurow, Head to Head: The Coming Economic Battle among Japan, Europe and America, New York: William Morrow, 1992.
15 Tyson, op. cit., p.3.
16 For a summary of recent developments in strategic trade theory, see Elhanan Helpman and Paul R. Krugman, Market Structure and Foreign Trade: Increasing Returns , Imperfect Competition and the International Economy, Cambridge, MA: MIT Press, 1985 and Paul R. Krugman, 'Strategic sectors and international competition', in Robert M. Stern, US Trade Policies in a Changing World Economy, Cambridge, MA: MIT Press, 1987, pp. 207-232. See also, Dieter Ernst and David O'Connor, Competing in the Electronics Industry - The Experience of Newly Industrialising Countries, London: Routledge, 1992.
17 David B. Yoffie, 'Technology challenges to trade policy', paper presented at the National Academy of Engineering Symposium on 'Linking Trade and Technology Policies; An International Comparison', Washington, DC, June 1991.
18 For a full exploration of the 'model', see, Stopford and Strange, Op. cit.
19 An association of large Japanese employers.
20 The Economist, April, 24, 1993, p. 80.
21 Data and forecast provided by Ken Courtis, senior economist, Deutsche Bank Capital Markets Asia, at a Business Week conference, Palm Beach, April, 1993.
22 The fourth round of negotiating the terms and conditions of the Multi-Fibre Arrangement.
23 For a careful exploration of the new economics of automobile production across borders, see J. P. Womack, D. T. Jones and D. Roos, The Machine that Changed the World, New York: Rawson Associates, 1990.
24 For a careful analysis of the importance of technology and human capital for the USA, see Edward F. Dennison, Trends in American Economic Growth, 1929-1982, Washington, DC: The Brookings Institution, 1985.
25 Yoginder Alagh, 'The NIEs and the developing Asian and Pacific region: a view from South Asia', Asian Development Review, 7, no. 2.,1989, quoted by Robert Wade, 'East Asia's economic success: conflicting perspectives, partial insights, shaky evidence', World Politics, 44, no. 2, January 1992, pp. 270-320.
26 Reported by Robert R. Miller in 'Determinants of US manufacturing investment abroad', Finance and Development, March 1993.
27 Michael Porter, The Competitive Advantage of Nations. London, Macmillan, 1990.
28 See, for example, Wayne R. Cartwright, 'Multiple linked diamonds: New Zealand's experience' Management International Review, Special issue, Vol. 33, 1993, pp. 55-70
29 Raymond Vernon, 'Transnational corporations;where are they coming from, where are they headed?', Transnational Corporations, Vol 1, No.2, August, 1992, pp. 7-35.
30 Stopford and Strange, Op. cit., p.135.
31 John H. Dunning, 'The global economy, domestic governance, strategies and transnational corporations: interactions and implications', Transnational Corporations, Vol.1, No. 3, December 1992, pp. 7-45.
32 Louis T. Wells, Jr., 'Conflict or indifference: US multinationals in a world of regional trading blocs', Paris: OECD Development Centre Technical Paper, 1992.
33 For a fuller exploration of the combined effects, see John M. Stopford, Offensive and Defensive Responses by European Multinationals to a World of Trade Blocs, OECD Development Centre, Paris, Technical Paper No. 64, 1992, from which some of the general arguments presented here are drawn; see also Helen V. Milner, Resisting Protectionism, Princeton, NJ: Princeton University Press, 1988 for an exploration of multinationals' influence on the politics of international trade.
34 C. J. Van der Klught, 'Japan's global challenge in electronics - the Philips' response', European Management Journal, Vol 4., No. 1, 1986, pp. 4-9.
[1] John M. Stopford and Susan Strange, Rival States, Rival Firms, Cambridge: Cambridge University Press, 1991.
[2] 1 The most eloquent statement of the threat to one nation from other governments' interventions in high-technology industries is provided by Laura Tyson, Who's Bashing Whom? Trade conflict in High-Technology Industries, Washington: DC, Institute for International Economics, 1992.
[3] 2 'Comparative Advantage', in The New Palgrave: The World of Economics, London: Macmillan, 1991.
[4] K. Ohmae, The Borderless World, New York, Harper Business, 1990.
[5] Richard Caves, Multinational Enterprises and Economic Analysis, Cambridge, MA: Cambridge University Press, 1982
[6] John Cantwell (ed.) Transnational Corporations and Innovatory Activities, United Nations Library on Transnational corporations. London: Routledge, 1993