Showing posts with label foreign direct investment. Show all posts
Showing posts with label foreign direct investment. Show all posts

Friday, May 9, 2014

Including Investment and Labor Movement in Global Management Assessments

In today’s world, international business is a mainstay of everyday commerce and policy.  Products move across the globe and make their way into homes and lives of individuals and families at different places on the planet. Most statistics include the hard goods and services that traverse across borders but may be missing other tangible value. Dr. Predrag Bjelić discusses the inclusion of direct foreign investment and labor flow as important components of economic calculations. 

Even though 2006 IMF data indicated that 75% of international trade is measured in goods the liberalization of trade has also brought with it services, investment and human capital. The latter two being something more difficult to concretely assess but should be included in the overall assessment. Understanding the flow of information along with the intellectual capital encourages a greater conception of global commerce and the antecedents to that commerce.

Foreign Direct Investment (FDI) is an important method of pushing up the employment economy. FDI can be defined as “an investment involving a long-term relationship and reflecting a lasting interest and control by a resident entity in one economy (investor or parent enterprise) in an enterprise resident in an economy other than that of the investor (FDI enterprise or affiliate enterprise or foreign affiliate)”(UNCTAD 2007, 245). 

In the past, emerging markets grew from turning investment income into productive output sold on the global market. To be effective in this growth, human capital will also need to develop adequately to use that investment capital to its maximum growth potential. Countries that have excess labor skill inadvertently lose some of that labor skill to countries that provide employment opportunities. 

The author determines that multi-national companies have changed traditional calculations of international commerce. In many cases large firms provide direct foreign investment and emerging economies export skilled labor in a type of loose exchange. New calculations should take into account the flow of investment and the movement of labor across the borders to get a better perspective of global exchange.

UNCTAD. 2007. World Investment Report 2007:Transnational Corporations, Extractive Industries and Development. Geneva.

Bjelic, P. (2013). New approach in international trade analysis due to international factor movements. Zbornik Radova Ekonomskog Fakulteta u Istocnom Sarajevu, 7

Friday, November 1, 2013

Synergy Development in Economic Hubs

Successful development in Southeast Asia often rests partly in foreign direct investment and multinational firms. The author studied the investments between Malaysia and Singapore to determine that two-way investments embedded within business networks fostered synergy for economic growth (Yeung, 1998). It is a process of creating linkages between two economies, or entities, to ensure they develop from each other to create products for the market. 

What makes this process possible is that Malaysia and Singapore invest in each other’s economies. For example, Singapore invests primarily in services within Malaysia’s primary manufacturing base. Malaysia becomes an exporter of finished products and returns investment profits back to companies in Singapore. 

As the cross regional investments increase so does the business connection between the areas. The use of these connections and cross-capital investments creates a type of synergy based upon the varying skill sets embedded within each economy. Together they are able to provide stronger and better products and services that have more appeal on the market. 

When countries develop they change from importers to exporters (Dunning, 1998). This happens when the environment is conducive to local offerings; competitive strategy effectively reflects that need and the organizations are aligned to provide adequate products/services (Porter, 1990).  The area must align its business operations and offerings to the market need to effectively grow. 

Firms do not need to be owned by the exporting locality but the region should be the home location where investments turn into exports (Porter, 1986). The firms were the primary source of success in creating synergy. At a firm level it was these personal and business connections between companies that helped to create greater investment and cooperation for economic growth (Chandler, 1990). 

Most of the major firms from each country have cross operations. These cross operations connect to other networks within the countries and begin to share resources and knowledge. Significant competitive advantages can arise when companies from different countries and firms work together (Yeung, 1998). These are a result of:

-       Long-term relationships that reduce business uncertainty. 

-       Shared resources and information that offer “first mover” advantages.

-       Increased credit worthiness that improves financial flow.

-       Once established the system protects itself. 

Chandler, A. (1990) Scale and Scope: The Dynamics of Industrial Capitalism. Harvard University Press, Cambridge, MA.

Dunning, J. (1998)  Explaining International Production. Unwin Hyman, London.

Porter, M. (1986) Competition in global industries: a conceptual framework, in PO RT ER M. E. (Ed) Competition in Global Industries, pp. 15± 60. Harvard Business School Press, Boston.

Porter, M. (1980). The Competitive Advantage of Nations. Macmillan, London.

Yeung, H. (1998). Transnational economic synergy and business networks. Regional studies, 22 (8). 

Yeung, H. (1998a) The political economy of transnational corporations: a study of the regionalisation of Singaporean firms, Pol. Geogr., 17, 389± 416.