Multinational Firms, Regional Integration and Globalising Markets: Implications for Developing Countries

Rajneesh Narula

No 35, Research Memorandum from Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT)

Abstract: It is axiomatic that the potential of FDI to act as a catalyst for economic development varies by its motivation, and the competence level and scope of foreign-owned affiliates. This chapter seeks to examine the effect of regional integration (RI) on MNE strategies while acknowledging other globalisation-related developments. We examine MNE strategies in developing countries in four scenarios; (1) in a non-RI, pre-liberalised environment; (2) with RI in a pre-liberalised environment (3) in a non-RI, post-liberalisation scenario, (4) RI in a post-liberalisation scenario. We also distinguish between least developed countries (LDCs), and intermediate developing countries, within North-South and South-South RI. Liberalisation and a shift in policy orientation have had a greater affect on MNE strategies than integration. Globalisation of MNE activity and liberalisation has led to a downgrading of MNE activity in most LDCs. Much of the gains in FDI flows have been a result of redistribution, associated with privatisation. Countries with a threshold level of domestic capability and more efficient institutions have benefited from increases in the quality of FDI. RI schemes have reinforced these trends, benefiting those countries that have a viable domestic sector, and have created the appropriate multilateral institutions to exploit cross-border efficiencies. In general, South-South RI in a post-liberalised world has had limited benefits for LDCs relative to intermediate developing countries. RI schemes need to be seen as an opportunity to respond gradually to globalisation in a controlled and stepwise- manner, and not as an alternative to multilateralism.

Keywords: economics of technology (search for similar items in EconPapers)
Date: 2001
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Citations: View citations in EconPapers (5)

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