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This study presents novel estimates of foreign holdings using a consolidated-by-nationality approach for a sample of 14 developed countries over multiple years. This approach provides an alternative for policymakers and researchers to analyse international exposure that complements the existing approach based on residence-based data. Two main advantages of the nationality-based approach are that it looks through corporate structures of multinational enterprises and considers local positions. The resulting novel data show that aggregate international financial integration is larger than residence-based data indicate for the sample. These data are used to analyse (i) profit-shifting activities and (ii) spillovers from United States monetary policy shocks. This study presents evidence suggesting that nationals of relatively high-tax countries may shift assets to low-tax countries in ways not fully captured in residence-based statistics. It also shows that a tightening in United States monetary policy is associated with a decline in foreign asset holdings by non-financial multinational enterprises using the consolidated-by-nationality approach. These findings underscore the relevance of using the consolidated-by-nationality approach to evaluate policy-relevant questions. Keywords : consolidated-by-nationality statistics, financial globalization, international financial integration, policy spillovers, residence-based statistics, tax differentials JEL classification codes : F21, F23, F36, F41, F42, 1. Introduction How can policymakers assess the exposure that a country's households and firms have to international risk factors? The conventional approach uses data on countries' foreign holdings. These data [...]

This study investigates the productivity gap between foreign-owned and domestic Arms in Viet Nam. Using quantile regression estimation for the period of 2011-2020, the study first examines the impact of Arms' specifics and of provincial governance quality on firms' total factor productivity at different points of the productivity distribution. The results show that labour productivity, market share and return on assets appear to significantly affect firm productivity regardless of firm groups or quantiles. To understand the productivity gap between foreign and domestic firms, the study uses the quantile decomposition approach to differentiate the factors that contribute to the gap at different quantiles. Our findings reveal that across quantiles most of the productivity gap is explained by firms' specifics, especially labour productivity. To address the productivity gap between foreign-owned and domestic firms in Viet Nam, policymakers should focus on enhancing domestic firms' access to technology, firms' experience and human capital development, as firm-specific factors appear to be major contributors to the productivity differential. In addition, improving provincial governance quality and creating an enabling environment for both foreign-owned and domestic firms can further stimulate productivity growth and foster healthy competition in the manufacturing sector. Keywords : domestic firms, foreign direct investment, quantile decomposition, total factor productivity gap, Viet Nam JEL classification codes : F63, L25, L60, O53, 1. Introduction Foreign direct investment (FDI) has played a pivotal and transformative role in shaping the economic landscape of Viet Nam throughout the past few decades. Viet Nam is known [...]

Good corporate governance practices are not universal. Unlike practices in institutional settings in developed countries, which have attracted most scholarly attention, corporate governance practices in emerging economies lean towards addressing principal-principal conflicts that stem from concentrated ownership. The study employs a difference-in-differences panel data design with matched samples of Chinese firms cross-listed in mainland China and Hong Kong (China) and of those listed only in Hong Kong (China) based on propensity score matching. It thus adopts a natural experimental setting--the promulgation of China's Revised Securities Law in March 2020 --to pinpoint whether and how legal revisions of investor protection laws can really benefit investors. The findings show that independent directors in cross-listed firms turn over significantly more than those in firms listed only in Hong Kong (China). Also, it suggests that firms mainly replace departed directors with new directors from similar demographics. Furthermore, the study observes no evidence of significant changes in board independence in the short run. The findings suggest that policymakers should mind unintended consequences beyond the intended outcomes of the legal reforms on corporate governance, particularly the potential disproportionate impacts on smaller firms. Keywords : China, corporate governance, cross-listed firms, emerging economy, independent director, legal reforms, principal-principal conflicts JEL classification codes : G34, G38, K22, K40, P26, P52, 1. Introduction One core theme of the corporate governance literature is the mechanisms that protect shareholder interests. Adopting the classic agency theory (Eisenhardt, 1989; Fama and Jensen, 1983; Jensen and [...]

Using recently published country-by-country reporting data released by the United States Internal Revenue Service, we assess United States multinationals' activity in the single market, aiming to contribute with data-based evidence to the ongoing political debate about the potential changes in the European corporate tax system. Our findings show evidence of artificial profit shifting across member States under the current method to allocate profits of multinational enterprises, with the Netherlands, Luxembourg and Ireland appearing to be the countries showing a higher degree of complicity with these activities. Such actions challenge fair international taxation in the European Union, distorting European internal competition and hampering tax revenue collection. Although it may not be (yet) the time for a worldwide unitary taxation approach, the analysis highlights the urgency for the European Union to adopt a formulary apportionment approach, overhauling a century-old set of global tax rules based on the separate entity approach. Keywords : country-by-country reporting, European Union, formulary apportionment, tax havens, United States multinationals enterprises JEL classification codes : D22, F23, F60, H25, H26, 1. Introduction This study adds to the growing research on the activity of multinational enterprises (MNEs) in the European single market (Garcia-Bernardo et al., 2021 and 2022). Starting from the [...]

In recent years, interest has been growing among policymakers in how to leverage special economic zone (SEZ) policies to support local entrepreneurship. With a few recent exceptions, the academic literature to date has been silent on the matter. This article aims to contribute to addressing this gap. First, it develops a conceptual framework linking SEZ policies and entrepreneurship development. Second, it explores the state of play of entrepreneurship promotion in SEZs in Africa using a survey of African SEZs and two case studies. We And significant appetite among African SEZs to promote local entrepreneurship; however, it is less clear how best to accomplish the task. Many of the policies, facilities and services offered are open to local entrepreneurs rather than being tailored specifically to their needs. The support required in some policy areas also seems to be more straightforward than in others. Adapting the SEZ offering to the needs of local entrepreneurs is one of the key challenges to increasing the effectiveness of the support. Keywords : special economic zones, entrepreneurship, developing countries, local economic development, knowledge spillovers, sourcing linkages JEL classification codes : L26, O31, O55, O25, R58, 1. Introduction Special economic zones (SEZs) are an ever-popular policy tool for promoting investment, generating employment and stimulating innovation. Policymakers put their hopes in them to overcome key developmental challenges [...]

To address the grand challenges that society faces, Incremental change and gradual organizational renewal are not sufficient. A radical transformation of business models is needed. In this paper, we explore game-changer business models that incorporate sustainability principles into their organizational DNA. We draw on two examples from the agrifood sector to illustrate the components of the business model, the impact of Industry 4.0 technologies and the sustainability outcomes. We reinforce the importance of collaboration between policymakers, business leaders and researchers to identify, promote and scale up these business models for transformative societal change. Keywords: business model innovation, game-changer business models, grand challenges, Industry 4.0 technologies, scaling, sustainability JEL classification codes: D20, L20, M13, O14, Q01, 1. Introduction How can organizations become conduits of transformative change and sustainable development? How can they facilitate new ways of doing business by addressing societal challenges and limiting harmful impacts [...]

In this research note, we propose a novel and Innovative measure for the Internationalization of digital firms. Our measure overcomes some of the weaknesses that inhibit traditional measures of internationalization in their application to digital firms. The measure uses Google Trends data and captures the volume and distribution of a digital Arm's recognition in the digital universe. In addition to developing the measure, we conduct empirical tests to apply our internationalization measure to traditional and digital firms and compare our results to data from UNCTAD's Transnationality Index. Our empirical comparison offers insights into the internationalization of digital firms. We discuss these insights and offer an impetus to developing a theory of digital internationalization. Keywords: degree of internationalization, digital companies, firm internationalization, Google Trends, measuring internationalization, volume of internationalization JEL classification codes: C43, E22, F2, F6, F23, L86, M16, 1. Introduction Digital business models have a long and turbulent history. Originating in the early eighties, they showed euphoric international growth that ended abruptly in the burst of the dot-com [...]

As global value chain (GVC) participation and knowledge spillovers have arguably become more crucial for countries, it is still challenging to measure their real value for countries. The complexity comes from the trade in intermediate goods as part of GVCs and the inability to track their coupling with additional components and services. The result is double counting and lack of clarity about the real value of GVCs for countries. This paper assesses how GVC participation and knowledge spillovers influence double counting and transitively the innovation and value added growth in GVCs for the case of Japan. The empirical evidence suggests that expanding production fragmentation within GVCs and diversifying foreign suppliers in production stages foster innovation and maximize knowledge diffusion, leading to enhanced value added output. Thus, knowledge spillovers and feedback effects within and between countries at bilateral and multilateral integration levels affect the GVCs. The paper sheds light on the intricate nature of intermediate goods flows in GVCs and the link between double counting and knowledge spillovers in GVCs. Keywords: double counting, global value chains, knowledge spillover, value added JEL classification codes: E01, E16, F14, L14, 1. Introduction As multinational companies expand globally, global value chain (GVC) participation becomes more crucial but challenging to measure. The complex nature of trade in intermediate goods and the inability [...]

This paper explores traditional knowledge and its possible utilization by multinational enterprises (MNEs) in achieving the United Nation's Sustainable Development Goals, with a particular focus on Goal 13, Climate Action. We argue that traditional knowledge has been overlooked by business leaders and policymakers who have failed to explore its potential in tackling some of the 'grand challenges' facing the global economy. We suggest that achievement of the Sustainable Development Goals could be accelerated with the active involvement of MNEs. The key issues are what sort of involvement should they seek and what challenges must be overcome. We also outline policies to support the wider dissemination of traditional knowledge through MNE involvement. Keywords: climate action, cultural capital, multinational enterprises, SDGs, traditional knowledge JEL classification codes: F23, O33, O34, Q01, Q57, 1. Introduction The current global economy is at a turning point, with economic, political and social anxieties increasingly apparent. These anxieties are fuelled by growing recognition of the immensely complex [...]

A central message that came out of the 8th UNCTAD World Investment Forum was the urgent need for innovative solutions to facilitate the integration of least developed countries (LDCs) in the global trading system. In this article, I suggest that the international community should consider implementing a 'Global Value Chains for LDCs Initiative' as an integral part of such a solution package. This initiative proposes to make the value added exports of LDCs exempt from duties throughout their entire journey along global value chains. I discuss the mechanisms through which this initiative enhances the attractiveness of integrating LDCs into global value chains. Furthermore, I elaborate on how it can foster the creation of new metrics related to Sustainable Development Goals, encouraging corporate engagement in incorporating LDCs in their supply chains. Overall, the initiative proposes new pathways through which the global trading system can boost the involvement of LDCs in the global economy. Keywords: global value chains, least developed countries, sustainable development goals, trade costs, trade facilitation, value added trade JEL classification codes: F13, F15, F63, F68, O14, O24, 1. Introduction How can the international community promote fair and sustainable globalization that does not leave least developed countries (LDCs) behind? This was a key subtheme deliberated by members of [...]

Introduction UNCTAD's eighth World Investment Forum 2023 (WIF23) provided the opportunity to tap into the latest research and academic thinking to strengthen the support and advice to Member States. The [...]

The recently completed 2023 World Investment Forum in Abu Dhabi saw a rare confluence of leaders from public, private and civil society sectors gathering at dozens of scheduled and dozens more impromptu meetings aimed at building better cross-sector relationships and a common understanding about current best practices and near-term trends in sustainable development around the world. Here is what I took away from those meetings: (1) discussions there were building an investment regime to guide leaders within and across sectors who are trying to achieve the Sustainable Development Goals, leading to faster economic development and better environmental, social and governance practices; (2) debates there were focusing on how and how quickly to build that regime and reach those goals with investment projects based on public-private-partnerships; and (3) occasional dissent there about how to build that regime and reach those goals reminded some about inconvenient evidence-based truths about investor- State dispute settlement clauses in bilateral investment treaties and foreign direct investment. I elaborate on those points and conclude with some personal reflections and suggested additions to future meetings aimed at building that investment regime and advancing towards those development goals. Keywords: economic development, environment, sustainability, foreign investment, institutions JEL classification codes: O44, P18, P48, 1. Hammering out an investment regime that supports sustainable development Good policy is hammered out on the anvil of vigorous discussion, debate and dissent. I saw and heard all three [...]

This note explores the literature on the determinants of foreign direct investment and domestic savings. With respect to foreign direct investment, it argues that institutional quality is the key driver of the type of investment that is necessary for structural transformation. With respect to domestic savings, focusing on sub-Saharan Africa, which lags behind other regions in savings rates, it suggests that there needs to be a stronger emphasis on long-term capital needs of the region. Policymakers can support the growth of pension and capital markets and the fintech sector through appropriate reforms and through re-orienting sovereign wealth funds towards more developmental purposes. Keywords: capital markets, fintech foreign direct investment, pension funds, savings JEL classification codes: E21, E22, 040, 1. Introduction The vast empirical literature on economic growth has found that investment is a key determinant of growth (Barro, 1991). Investment rates (gross capital formation as a percentage of [...]

Industrialized countries increasingly use targeted subsidies to lessen Arms' disadvantages caused by climate change, geopolitical realignment of trade relationships and local COVID-19 pandemic dislocations. The debate over the United States Inflationary Reduction Act and the European Union criticism of it because of its effect on Arms' investment location choices exemplify how subsidies affect investment flows. We investigate to what extent different subsidy schemes affect Arms' investment location choices and explore the effect on two dimensions: immediacy (direct versus indirect) and firm specificity (firm-specific versus non-firm-specific). Using a sample of United States MNEs and their investments in subsidiaries in the European Union and China, we find that direct subsidies have a greater positive effect on investment than indirect subsidies, and that non- firm-specific subsidies have a greater positive effect than firm-specific subsidies. Our study establishes a more nuanced understanding of subsidy effects, suggesting that policymakers should align their subsidy schemes for attracting foreign direct investment accordingly. Keywords: foreign direct investment, institutions, investment location choice, policy support, subsidies JEL classification codes: D04, D78, H29, L52, 1. Introduction The rapid succession of recent and ongoing international crises, such as the COVID-19 pandemic (WHO, 2023), the Russia-Ukraine war (1) with its resulting shock to food and energy [...]

This study aims to assess the pattern and prevalence of intrafirm activities in foreign exchange transactions of foreign affiliates in the manufacturing sector in India. The related-party foreign transactions of selected foreign affiliates are analysed for two years, and the shares of financial payments directed to tax haven locations are identified to appraise the vulnerability of these outflow transactions to potential risk of corporate tax avoidance. A majority of foreign exchange earnings and expense transactions were found to be conducted within firms. The major part of intrafirm payments for the key expenditure types was made to various tax haven locations having different levels of tax avoidance risk. Close to half of all expense payments were traced to tax havens, with several firms reporting predominant shares of intrafirm import, financial or services payments linked to certain significant tax havens. The data indicate active involvement of foreign affiliates in India in the use of tax havens for foreign expense transfers, which could be motivated by tax avoidance aims. This tendency is noted to be high for specific channels such as services, interest payments and other miscellaneous transactions, suggesting that these channels may be used for transfer mispricing and tax avoidance strategies by foreign- affiliated firms. Keywords: corporate tax, foreign direct investment, foreign affiliate, intrafirm trade, intrafirm transaction, multinational corporation, manufacturing sector, tax avoidance, tax haven, JEL classification codes: F14, F21, F23, H25, H26 1. Introduction The global production and trade operations of multinational corporations (MNCs) are largely characterized by within-firm transactions between their affiliated branch [...]

The contributions of small and medium-sized enterprises (SMEs) to domestic economies are sizeable. The most productive and dynamic ones venture abroad and internationalize by exporting or by investing overseas. For smaller Arms, foreign direct investment (FDI) implies the commitment of a high level of resources, potentially increasing the risk of failure. This study empirically assesses the question of whether outward investment is a valuable growth strategy or whether engaging in FDI might hurt performance. The results show that while displaying higher revenue growth rates than their larger counterparts, SMEs experience a bigger shock after their foreign investment: the sales growth of SMEs decreases by about 6 per cent during the first three years after a cross-border greenfield project; it starts recovering only after the fourth year. Larger MNEs show no significant change in growth rate after an investment. The decrease in revenues in SMEs occurs mostly in manufacturing enterprises, and less so in services companies. This is primarily because for services companies a foreign affiliate, which almost by definition is market-seeking, tends to make an immediate contribution to sales and sales growth, whereas many manufacturing affiliates require a start-up period and may engage in activities that contribute less to sales growth, such as supply chain activities. Keywords: foreign direct investment (FDI), internationalization, multinational enterprises (MNEs), small and medium-sized enterprises (SMEs) JEL classification codes: C4, F23, L11, L25, G32, 1. Introduction In 2017, the United Nations designated 27 June as Micro, Small and Medium-sized Enterprises (MSMEs) Day to raise awareness of MSMEs' critical role in economic growth, job creation [...]

This study examines two potentially opposing effects that the current state of trade globalization can have on foreign governmental lobbies in the United States. On one hand, economic globalization and increased flows of goods may lead to more and more contentious issues between trading partners. On the other hand, the growing networks of global value chains (GVCs) may mobilize interest groups in foreign lobbies' target countries (the United States in this study), whose activities might substitute for those of foreign governmental lobbies. With such linkages, an increase in lobbying activities by domestic producers may reduce the need for direct foreign lobbying on contentious issues. The study reveals different effects of forward and backward GVC linkages, and the results have two main policy implications: first, policymakers should be aware of the growing intricate nature of foreign influence; second, more attention must be paid to political consequences of GVCs' distributive effects, particularly those from backward linkages. Keywords: global value chains, interest groups, international political economy, lobbying, JEL classification codes: D72, F5, F6, F13, F50, O24 1. Introduction In the late 1970s Robert Keohane and Joseph Nye presented 'complex interdependence' as an alternative to the then-dominant State-centred [...]

This study examines the effect of regulatory outreach actions on modern slavery statements by the United Kingdom. More than 30,000 policy entries in the United Kingdom Modern Slavery Compliance Registry from 2020 to 2022 were reviewed using analysis of variance and multiple regression to determine predictors of policy statement robustness. The results reveal that policies have become more robust following regulatory efforts. Private conglomerate groups, which can include multinational corporations, are the largest publishers to the registry. However, the role of the chief executive officer as the authority approving the statements has diminished in impact, while company turnover has emerged as a more reliable predictor of impact. Furthermore, the presence of International Labour Organization indicators in the policy statement shows that concern for child-related issues can vary depending on the geographical focus of risk, but that it does not predict a focus on women. The steady improvement in the robustness of modern slavery policies signals some progress following regulator outreach. Keywords: forced labour, modern slavery, regulation, sustainable development goals, UK, JEL classification codes: F2, F23, J8, K2 1. Introduction The International Labour Organization (ILO) estimated that 27.6 million people were living in modern slavery in 2021, despite criminalization of the [...]

This paper discusses the concepts of reshoring and nearshoring, which are gaining increasing popularity. We contribute to the literature in three main ways. First, building on previous theories we define a conceptual framework and consider how recent developments--the COVID-19 pandemic and Industry 4.0 technologies may affect these patterns. Second, we process some preliminary evidence to test whether Latin American and Caribbean economies are indeed participating in this reshoring trend. Third, we propose a measure of 'reshoring readiness', to assess whether these countries appear to be ready to host relocations and benefit from them. Overall, we find limited evidence of nearshoring to the region so far, except in Mexico, and we highlight strengths and weaknesses of the region for attracting and benefitting from future relocations. Keywords: FDI, global value chains, Industry 4.0, Latin America, nearshoring, reshoring, JEL classification codes: F14, F21, F23, F63, L24 1. Introduction The last decades of the twentieth century were characterized by a fast globalization process. Trade and industrial production were drastically [...]

Multinational enterprises in emerging markets (EMNEs), owing to weak enforcement of intellectual property rights (IPR), face challenges when undertaking domestic innovation. As a result, they may search for superior IPR environments in which to create greenfield projects focused on research and development (R&D) and innovation. We hypothesize that the likelihood that an EMNE chooses to invest in an R&D-focused greenfield project over other FDI projects is positively associated with increased levels of host-country patent enforcement protection relative to its home market. In addition, we hypothesize that EMNEs, many in the process of catching up through 'springboard' FDI with developed-market MNEs (DMNEs), are more sensitive to IPR protection than DMNEs. Results of logistic regression modelling of 112,908 greenfield projects largely support our hypotheses. We discuss implications for understanding EMNE theorizing and policy, which has to date focused more on regulating technology-seeking mergers and acquisitions (M&As), overlooking the growing importance of R&D-related greenfield FDI as an effective firm-level catch-up strategy for EMNEs. Keywords: greenfield FDI; firm-level catch-up; springboard theory; institutional arbitrage; intellectual property rights; strategic asset seeking, JEL classification codes: F21, F23, F68, O32, O34 1. Introduction The strategic asset-seeking (hereafter SAS) orientation of MNEs from emerging markets (EMNEs) has become a hallmark feature of their motivation [...]

This research note investigates the relative innovation performance and international presence of small and medium-sized enterprises (SMEs) in Turkiye. Using administrative data for the period 2006-2020, the empirical analysis shows that government support for research and development (R&D) correlates positively with Arms' innovation activities and R&D expenditure. The results also suggest that innovation activities increase the probability of outward foreign direct investment. The results have important policy implications for Turkiye and developing countries in general. The findings highlight the key role of public incentives in targeting innovative activities towards internationalization of SMEs. Keywords: FDI, innovation, innovation policy, panel data, R&D, SMEs JEL classification codes: D25, F21, F23, O31, O32, 1. Introduction Innovation is a key determinant of productivity and long-term growth, and helps enhance the capacity of Arms to grow and adapt to market challenges, especially small and medium-sized [...]

Why do small and medium-sized enterprises (SMEs) from lower-income countries Internationalize using high-commitment modes? In this exploratory, qualitative study of 22 SMEs from South Africa (a middle-income country) and Malawi, Zambia and Zimbabwe (low-income countries), we document that the SMEs typically have both a greater tolerance for risk, likely due to the region from which they originate, and an appetite for opportunities smaller than what would be acceptable to multinational enterprises (MNEs) from advanced economies. This provides a very different opportunity space for the two types of enterprises. The size of the home country seems to matter: SMEs from middle-income countries often work on their own and target other emerging markets, but in poorer countries, SMEs often work synergistically with MNEs from more advanced economies, acting as their 'delivery arm' into the small markets in their immediate region. This opens up a new way of understanding MNE-led development. Facilitating the development of partnerships between local SMEs and advanced MNEs is a potentially fruitful avenue that policymakers from poor countries can pursue to help their countries open to the benefits of internationalization. Keywords: Africa, CSA, FSA, micro-multinationals, opportunity, risk JEL classification codes: F63, L25, L26, M16, O19, 1. Introduction How can Arms that are not only small but also from less developed countries use high-commltment modes to internationalize? Extant literature has long suggested that small and medium-sized [...]

Globalization has led to the decentralization of research and development (R&D) activities by multinational enterprises (MNEs). Investment in these activities is affected by both the host-country environment and the investment strategies of the entrant MNEs. Using data on greenfield R&D investment projects for a sample of digital MNEs in the communications, software and IT service industries during the period 2003-2019, we investigate the importance of host-country characteristics on MNEs' R&D investment and examine the moderating role of the host country's innovation capabilities as well as two strategies--exploitation versus exploration --on the part of MNEs. We And that the size of investment projects is larger in developing countries than in developed ones, especially when host countries have stronger innovation capabilities and when MNEs pursue strategies of exploitation rather than exploration. Our findings contribute to the extant research in this area and furnish related policy implications for developing countries. Keywords: developing countries, global innovation index, host country innovation capabilities, R&D greenfield investment project, R&D investment strategies JEL classification codes: F21, F23, F68, L21, L86, 1. Introduction International business research has paid close attention to foreign direct Investment (FDI) in research and development (R&D) (Choquette et al., 2021; Dachs and Zahradnik, 2022) and has shown [...]

Online platforms that allow non-residents to register Arms have emerged to boost economic development goals in jurisdictions ranging from Wyoming (United States) to Estonia. They create novel governance challenges that fall between governance frameworks. The global tax governance agenda needs to address the role of such platforms, which often involve conflicts between economic policy aspirations and other goals. Our Estonian case study demonstrates the inability of authorities to perform background checks of numerous non-resident entrepreneurs, as national administrative capacities get strained. Building on the nascent tax spillover approach, we analyse administrative spillover effects caused by online incorporation platforms in international taxation. Mapping de facto administrative capacities requires analysing conflicts between governmental priorities and the obstacles of sharing information between administrative and criminal procedures. When the non-resident community grows compared with the size of the domestic economy, supervisory systems tailored for domestic entrepreneurs become strained. We show that resolving this policy conflict assumes targeted investments into administrative capabilities from skilled personnel to data exchange and interorganizational coordination. Keywords: e-governance, e-residency, Estonia, money laundering, tax governance, tax evasion JEL classification codes: M13, O16, O23, O52, P16, 1. Introduction Registering small companies abroad used to be associated with international crime and the super-rich, or with holding companies of transnational corporations (TNCs). However, technological advances and digital business [...]

A number of regional trade agreements (RTAs) include investment protection provisions that may limit a country's ability to change tax measures. This limitation could raise concerns for States as regards the recently agreed global minimum tax under the Global Anti-Base Erosion (GloBE) Rules, as its implementation could amount to a breach of investment obligations. Therefore, this paper analyses how the GloBE Rules and their impact on investment incentives interact with investment provisions in RTAs, also considering the impact of the minimum tax on regional integration efforts and the potential for a regional approach to its implementation. Keywords: GloBE, IIA, international taxation, Pillar Two, RTA, tax incentives JEL classification codes: F13, F21, F23, H25, K34, 1. Introduction From an economic standpoint, investment protection is argued to increase foreign direct investment (FDI) by providing certainty to investors and lessening the risks they face. (1) This argument [...]

This paper aims to advance research on transnational corporations (TNCs) and international business policy by identifying the role and influence of foreign-owned TNCs in global value chains (GVCs) compared with those of domestically owned Arms. We do this by dividing the topology of trade in value added (TiVA) into three networks composed, respectively, of traditional trade, simple GVC trade and complex GVC trade, based on the OECD intercountry input-output data for 2005-2016. Our empirical results show that China's domestically owned Arms have not only been supply centres of manufacturing value added, but have also risen as new regional centres of both supply and demand for services through simple GVC networks. Domestically owned firms of the United States dominate GVCs in services as a global center for both demand and supply, especially in complex GVC networks. TNCs located in Germany and the United Kingdom have a dominant presence in providing value added in manufacturing and services, respectively, through complex GVC networks. By making GVCs visible through TiVA-based network analyses, this paper significantly extends the understanding of whodominates what types of GVC. This will help policymakers better monitor and enhance their GVC governance and competitiveness strategies in more flexible and diversified ways. Keywords: global value chain, input-output analysis, Arm ownership, international business, trade in value added, transnational corporations JEL classification codes: D57, F6, F13, F15, 1. Introduction The rise and spread of global value chains (GVCs), mainly organized by transnational corporations (TNCs), are considered among the most important features of economic globalization in the 21st [...]

Transnational Corporations (1) is a longstanding, policy-oriented, refereed research journal on issues related to investment, multinational enterprises and development. It is an official journal of the United Nations, managed by [...]

International project finance (IPF) can channel private cross-border capital toward productive investments in (mostly) infrastructure sectors, especially where government budget constraints are tight. Moreover, it has recently gained importance as a tool to finance the Sustainable Development Goals (SDG) and bridge the large infrastructure gap for climate megaprojects. In such contexts, projects often require international capital along with expertise and credibility; they also require a project-specific risk allocation that IPF accommodates. This research note assesses project finance in the context of international productive investments, its link with other forms of international investment (mergers and acquisitions, and cross-border greenfield investments) in the data used, and its use in UNCTAD's publications. Data is a lynchpin for analysis but is not unproblematic. The note explores incongruences and their impact. It also outlines UNCTAD's conceptual choice to capture ongoing productive investments in infrastructure through project finance in the world economy. Keywords: cross-border direct investment, imputation, international project finance, matching, Refinitiv data JEL classification codes: F30, F39, O16, O18, Q56, 1. Introduction The financing gap for the Sustainable Development Goals (SDGs) amounts to a massive $4.3 trillion per year (UNCTAD, 2022). A pre-pandemic analysis estimated that developing countries were missing [...]

The impact of Fourth Industrial Revolution (4IR) technologies on enterprises' internationalization strategies is ambiguous. Although digital technologies lower information and transaction costs and facilitate international coordination of overseas activities, automation technologies can push enterprises to reshore foreign operations. This paper analyses the impact of 4IR technologies on the foreign investment decisions of small and large enterprises in one of the most technologically advanced countries in the world: the Republic of Korea. The results indicate differential impact across enterprise sizes and technologies. The propensity of SMEs to invest overseas upon the adoption of 4IR technologies, especially digital technologies, increases relatively more than that of larger firms. The results have important implications for investment and development policies in the region. The findings highlight the key role of FDI by Korean SMEs in the technological development of neighbouring Asian economies, calling for increased attention to smaller players in investment promotion. Keywords: digital economy, foreign direct investment (FDI), Fourth Industrial Revolution (4IR), multinational enterprises (MNEs), small and medium-sized enterprises (SMEs), technology JEL classification codes: C43, F23, H25, L86, O31, 1. Introduction Small and medium-sized enterprises (SMEs) are important contributors to the economies of many nations, particularly in developing economies. On average, across sectors and geographies, SMEs represent more than [...]

The present paper investigates the effect of linguistic distance on location decisions of Moroccan outward foreign direct investment (FDI) using panel data on 54 host countries from 2007 to 2021 and the robust weighted least squares estimation method. The results show that the higher the share of French- and Arabic-speaking populations, the more the host country attracts FDI from Morocco. Also, the results show that the higher the share of the English-speaking population, the less the host country attracts FDI because English-speaking countries tend to adopt institutional structures (the Anglo-Saxon way of governance) that differ from the French model inherited by Morocco during its colonization. For Spanish, there is no effect on the location decisions of Moroccan multinational enterprises because of the language's marginalization at the formal level. The study highlights important policy considerations for home and host countries in terms of investment policy and investment promotion, language-in-education policies, and the role of international cultural and linguistic institutes in home and host countries. Keywords: foreign direct investment, internationalization, knowledge-capital model, language distance, multinational enterprises, psychical distance, robust least squares JEL classification codes: C23, F21, F23, Z19, 1. Introduction Globalization presents itself as a lasting and inevitable phenomenon, having reframed the functioning of the world economic scene through the removal of economic, social and cultural borders, greater [...]

This paper investigates the role of human capital and institutional quality in the nexus of foreign direct investment (FDI) and economic growth in 46 African countries between 2002 and 2018. Based on panel data modelling, the empirical findings suggest that FDI in itself does not promote economic growth in Africa; however, we observe that human capital and institutional quality play a supportive role in enhancing the positive spillover effect of FDI on economic growth in upper-middle-income countries in the region. The findings for low-income and lower-middle-income countries are mostly not significant. Given the initial conditions and absorptive capacity constraints in these countries, the positive spillover effects of FDI might be limited. From a policy perspective, the findings call for special attention by policymakers to improving the quality of their human capital and strengthening their institutions to maximize the benefits of FDI. Keywords: Africa, economic growth, foreign direct investment inflows, human capital, institutions JEL classification codes: F21, F43, J24, O43, O55, 1. Introduction Foreign direct investment (FDI) plays a critical role in growth in developing countries. It is a source of employment generation, skill acquisition and transfer of technology know-how, and [...]

From the initial stage of 'bringing in' foreign firms to the stage of 'going out' (going global), the four-decade development process of China is not just about its participation in globalization, but also about Chinese firms' innovation based on global knowledge sourcing. This study provides a new interpretation of the technology catching-up of Chinese firms, incorporating the theory of windows of opportunity, considering policies as windows for international knowledge sourcing and technology catch-up. It assesses the impact on innovation performance of inward and outward foreign direct investment policies as institutional windows for knowledge sourcing, aims to identify the effective width of windows of opportunity and establishes how these policies lead to outstanding innovation performance by latecomers over time by leveraging external knowledge. Threshold models were adopted using data from multiple sources on 187 Chinese listed firms in the digital industry, including 2,807 firm-year observations. The results show that nonlinear relationships exist between institutional windows and innovation performance. The roles and mechanisms of institutional windows of opportunities in Chinese firms' knowledge-sourcing process demonstrate the decisive effects of the Government's internationalization policies and their role in promoting the development of Chinese digital technologies. Implications are elaborated for both policymakers and Chinese multinational firms in the digital industry. Keywords: institutional windows of opportunity, knowledge sourcing; internationalization policy, technology catch-up, innovation performance JEL classification codes: F21, F23, L96, O3, O33, 1. Introduction In 1978, with China's reform and open-door policy, the country began its catching-up process in the manufacturing sector under the Government's guidance and supportive policies. Soon, a wave [...]

Do comprehensive trade agreements increase the participation of States in global value chains (GVCs) and contribute to their development? Although there is extensive evidence in the trade literature that deep preferential trade agreements (PTAs) can increase States' bilateral export of final goods and, by implication, contribute to local development, much less is known about the characteristics of this effect on GVC relations. This paper answers the question in the framework of a gravity model and uses a comprehensive dyadic data set on trade in GVCs, PTAs, export and other characteristics for 188 countries and economies between 1990 and 2018. Results provide robust evidence that deep PTAs increase members' bilateral trade in GVCs over the long term, especially when these agreements involve at least one developing country or economy and include provisions that support investment. These results underscore that GVC-facilitating deep PTAs are a powerful policy tool that can mobilize the potential of production and trade in GVCs for development. Keywords: development, global value chains (GVCs), integration, investment, trade agreements JEL classification codes: F14, F15, F55, F63, 1. Introduction and background Over the past three decades, there have been two important changes in the organization and institutions of international trade and production: the proliferation and deepening of [...]

The OECD agreement in principle on a global minimum corporate income tax --Pillar Two of the Base Erosion and Profit Shifting project--is a major step in international tax regulation and coordination. Yet, its consequences for foreign direct investment (FDI) have received limited attention thus far. In the present paper, the authors detail the analytical framework developed to underpin the findings of the World Investment Report 2022: International Tax Reforms and Sustainable Investment. The paper introduces the notion of FDI-level effective tax rate (ETR). Unlike standard ETRs, FDI-level ETRs embed the profit shifting schemes of multinational enterprises (MNEs). They capture not only the taxes paid on income reported in the host country of the foreign investment but also those levied on income shifted to offshore financial centres (OFCs). The effect of Pillar Two on these two components of the tax base determines the increase in the overall tax rate faced by MNEs, which ultimately affects the investment decisions of MNEs. After empirically calibrating ETRs, profit shifting and FDI-level ETRs of more than 200 countries, the authors quantify the effect of Pillar Two on FDI-level ETRs. The results show that after the reform FDI-level ETRs are likely to increase by 2 to 3 percentage points in non-OFCs, which corresponds to an increase in the corporate income tax liability for MNEs between 14 and 20 per cent. Keywords: effective tax rate, multinational enterprises, foreign direct investments, profit shifting, minimum tax, Pillar Two JEL classification codes: F23, F42, H25, H26, H32, 1. Introduction Pursued by the G20/OECD Inclusive Framework on Base Erosion and Profit Shifting (BEPS) to curb tax-motivated income shifting, the global reform of the taxation of large multinational enterprises [...]

This paper is based on microdata originating in the first collection of country-by-country reporting (CbCR)--a new reporting tool to be filed by multinational enterprises (MNEs). It analyses the differences between CbCR and other widely used data sources of MNEs and presents the case of MNE activities in Italy. The CbCR dataset is used to understand the global distribution of MNE activities. Results show that foreign activities are mostly concentrated in high-income countries for all economic indicators. In low-income countries, MNEs activity appears to be concentrated in labour-intensive industries. Middle-income countries have a relatively higher importance in terms of tangible assets and employment opportunities than they do in terms of revenues and profits. Investment hubs have a relatively higher share in global MNEs profits than they do in global MNEs tangible assets and employment. The CbCR data can be useful for policymakers to obtain an indication on how a country is positioned in the global value chain (GVC) and its attractiveness for foreign companies. Keywords: BEPS, corporate taxation, country-by-country reporting, GVC, multinational firms, offshoring JEL classification codes: F23, H25, H26, M16, 1. Introduction This work takes advantage of a new source of data, namely country-by-country reporting (CbCR). The availability of high quality and comprehensive data on the global activities of multinational [...]