Developing Countries versus Multinational Enterprises in a Globalising World: The Dangers of Falling Behind

Summary

Rajneesh Narula and John H. Dunning, ‘Developing Countries versus Multinational Enterprises in a Globalising World: The Dangers of Falling Behind’, Forum for Development Studies, 1999: 2, pp. 261–287.

This article makes five main points. First, economic globalisation has affected regions and countries unevenly and this is reflected in the configuration of multinational enterprise (MNE) activity. Second, the failure of most of the developing world to catch up is associated with the inadequate level of domestic created assets and the inefficiency of local firms. Third, an important means by which to upgrade their competitiveness has been the importation of technology, skills and organisational capabilities both via foreign direct investment (FDI) and by collaborative arrangements. Fourth, the conditions for catch-up are also necessary (but insufficient) conditions to attract FDI. Fifth, there is a threshold level of created assets which determines the ability of domestic firms to benefit from externalities that arise from MNE-related activity, and a threshold level of created assets and industry clusters is also necessary as location advantages to attract such activity in the first place.