IDEAS home Printed from https://ideas.repec.org/p/rdg/jhdxdp/jhd-dp2015-05.html
   My bibliography  Save this paper

The Importance of Domestic Capabilities for FDI-assisted Development: Lessons from Asia and Latin America

Author

Listed:
  • Rajneesh Narula

    (Henley Business School, University of Reading)

Abstract

This paper argues that the rapid growth of certain emerging economies over the last two decades is not only due to liberalised markets, MNEs and laissez-faire policies, but also to the effects of industrial development strategies that continue to share several similarities to the import-substitution industrialisation approach. The building up of capabilities in the domestic sector is crucial. At the same time, the heterogeneity in country experiences and their varying degrees of success at becoming internationally competitive indicates that understanding MNEassisted development requires us to go beyond just improving absorptive capacities. We also need to understand the role of political economy and issues of path-dependency in both policies and resources. I illustrate my arguments by contrasting the experiences of East Asian and Latin American economies.

Suggested Citation

  • Rajneesh Narula, 2015. "The Importance of Domestic Capabilities for FDI-assisted Development: Lessons from Asia and Latin America," John H Dunning Centre for International Business Discussion Papers jhd-dp2015-05, Henley Business School, University of Reading.
    • Handle: RePEc:rdg:jhdxdp:jhd-dp2015-05
    as

    Download full text from publisher

    File URL: http://www.henley.ac.uk/files/pdf/research/papers-publications/JHD-2015-05_Narula.pdf
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Rafael A Corredoira & Gerald A McDermott, 2014. "Adaptation, bridging and firm upgrading: How non-market institutions and MNCs facilitate knowledge recombination in emerging markets," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 45(6), pages 699-722, August.
    2. Rajneesh Narula & John Dunning, 2010. "Multinational Enterprises, Development and Globalization: Some Clarifications and a Research Agenda," Oxford Development Studies, Taylor & Francis Journals, vol. 38(3), pages 263-287.
    3. Paola Criscuolo & Rajneesh Narula, 2008. "A novel approach to national technological accumulation and absorptive capacity: aggregating Cohen and Levinthal," The European Journal of Development Research, Taylor and Francis Journals, vol. 20(1), pages 56-73.
    4. Sanjaya Lall, 1996. "Learning from the Asian Tigers," Palgrave Macmillan Books, Palgrave Macmillan, number 978-0-230-38989-2.
    5. Ram Mudambi, 2008. "Location, control and innovation in knowledge-intensive industries," Journal of Economic Geography, Oxford University Press, vol. 8(5), pages 699-725, September.
    6. Richard B. Freeman & David L. Lindauer, 1999. "Why Not Africa?," NBER Working Papers 6942, National Bureau of Economic Research, Inc.
    7. Ha, Yoo Jung & Giroud, Axèle, 2015. "Competence-creating subsidiaries and FDI technology spillovers," International Business Review, Elsevier, vol. 24(4), pages 605-614.
    8. Lall, Sanjaya & Narula, Rajneesh, 2004. "FDI and its role in economic development: Do we need a new agenda?," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    9. Crespo, Nuno & Fontoura, Maria Paula, 2007. "Determinant Factors of FDI Spillovers - What Do We Really Know?," World Development, Elsevier, vol. 35(3), pages 410-425, March.
    10. Xiaolan Fu, 2008. "Foreign Direct Investment, Absorptive Capacity and Regional Innovation Capabilities: Evidence from China," Oxford Development Studies, Taylor & Francis Journals, vol. 36(1), pages 89-110.
    11. Rajneesh Narula & John Dunning, 2000. "Industrial Development, Globalization and Multinational Enterprises: New Realities for Developing Countries," Oxford Development Studies, Taylor & Francis Journals, vol. 28(2), pages 141-167.
    12. Bon Ho Koo & Dwight H. Perkins (ed.), 1995. "Social Capability and Long-Term Economic Growth," Palgrave Macmillan Books, Palgrave Macmillan, number 978-1-349-13512-7.
    13. Cohen, Wesley M & Levinthal, Daniel A, 1989. "Innovation and Learning: The Two Faces of R&D," Economic Journal, Royal Economic Society, vol. 99(397), pages 569-596, September.
    14. Bruton, H.J., 1998. "A Reconsideration of Import Substitution," Center for Development Economics 156, Department of Economics, Williams College.
    15. Reinhardt, Nola & Peres, Wilson, 2000. "Latin America's New Economic Model: Micro Responses and Economic Restructuring," World Development, Elsevier, vol. 28(9), pages 1543-1566, September.
    16. Rugman, Alan M. & Brewer, Thomas L. (ed.), 2001. "The Oxford Handbook of International Business," OUP Catalogue, Oxford University Press, number 9780199241828.
    17. Garrick Blalock & Daniel H Simon, 2009. "Do all firms benefit equally from downstream FDI? The moderating effect of local suppliers’ capabilities on productivity gains," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 40(7), pages 1095-1112, September.
    18. Carl J. Dahlman & Richard Nelson, 1995. "Social Absorption Capability, National Innovation Systems and Economic Development," Palgrave Macmillan Books, in: Bon Ho Koo & Dwight H. Perkins (ed.), Social Capability and Long-Term Economic Growth, chapter 5, pages 82-122, Palgrave Macmillan.
    19. Henry J. Bruton, 1998. "A Reconsideration of Import Substitution," Journal of Economic Literature, American Economic Association, vol. 36(2), pages 903-936, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Uros Delevic & Irina Heim, 2017. "Institutions In Transition: Is The Eu Integration Process Relevant For Inward Fdi In Transition European Economies?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 5(1), pages 16-32.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Narula, Rajneesh, 2002. "Switching from import substitution to the ‘New Economic Model’ in Latin America: A case of not learning from Asia," Research Memorandum 042, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    2. Rajneesh Narula & André Pineli, 2017. "Multinational Enterprises and Economic Development in Host Countries: What We Know and What We Don’t Know," Palgrave Studies in Impact Finance, in: Gianluigi Giorgioni (ed.), Development Finance, chapter 6, pages 147-188, Palgrave Macmillan.
    3. Rajneesh Narula & André Pineli, 2019. "Improving the developmental impact of multinational enterprises: policy and research challenges," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 46(1), pages 1-24, March.
    4. Rajneesh Narula & John Dunning, 2010. "Multinational Enterprises, Development and Globalization: Some Clarifications and a Research Agenda," Oxford Development Studies, Taylor & Francis Journals, vol. 38(3), pages 263-287.
    5. Narula, Rajneesh, 2002. "The implications of growing cross-border interdependence for systems of innovation," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    6. Narula, Rajneesh, 2010. "Much ado about nothing, or sirens of a brave new world?: MNE activity from developing countries and its significance for development," MERIT Working Papers 2010-021, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    7. Lall, Sanjaya & Narula, Rajneesh, 2004. "FDI and its role in economic development: Do we need a new agenda?," Research Memorandum 019, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    8. Khadija Straaten & Niccolò Pisani & Ans Kolk, 2020. "Unraveling the MNE wage premium," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 51(9), pages 1355-1390, December.
    9. Sultana, Nasrin & Turkina, Ekaterina, 2020. "Foreign direct investment, technological advancement, and absorptive capacity: A network analysis," International Business Review, Elsevier, vol. 29(2).
    10. Rajneesh Narula, 2004. "Understanding absorptive capacities in an "innovation systems" context consequences for economic and employment growth," DRUID Working Papers 04-02, DRUID, Copenhagen Business School, Department of Industrial Economics and Strategy/Aalborg University, Department of Business Studies.
    11. Sanjaya Lall, "undated". "FDI and Development: Policy and Research Issues in the Emerging Context," QEH Working Papers qehwps43, Queen Elizabeth House, University of Oxford.
    12. Narula, Rajneesh. & Marín, Anabel., 2005. "Foreign direct investment spillovers, absorptive capacities and human capital development : evidence from Argentina," ILO Working Papers 993782123402676, International Labour Organization.
    13. Cuervo-Cazurra, Alvaro & Rui, Huaichuan, 2017. "Barriers to absorptive capacity in emerging market firms," Journal of World Business, Elsevier, vol. 52(6), pages 727-742.
    14. Narula, Rajneesh & Portelli, Brian, 2004. "Foreign direct investment and economic development: Opportunities and limitations from a developing country perspective," Research Memorandum 009, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    15. Narula, Rajneesh & Nguyen, Quyen T.K., 2011. "Emerging country MNEs and the role of home countries: separating fact from irrational expectations," MERIT Working Papers 2011-021, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Narula, Rajneesh & Marin, Anabel, 2003. "FDI spillovers, absorptive capacities and human capital development: evidence from Argentina," Research Memorandum 018, Maastricht University, Maastricht Economic Research Institute on Innovation and Technology (MERIT).
    17. Narula, Rajneesh, 2018. "Multinational firms and the extractive sectors in the 21st century: Can they drive development?," Journal of World Business, Elsevier, vol. 53(1), pages 85-91.
    18. repec:ilo:ilowps:378212 is not listed on IDEAS
    19. Jaideep Anand & Gerald McDermott & Ram Mudambi & Rajneesh Narula, 2021. "Innovation in and from emerging economies: New insights and lessons for international business research," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 52(4), pages 545-559, June.
    20. Rajneesh Narula & James X. Zhan, . "Using special economic zones to facilitate development: policy implications," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    21. Yadong Luo & Huan Zhang & Juan Bu, 2019. "Developed country MNEs investing in developing economies: Progress and prospect," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(4), pages 633-667, June.

    More about this item

    Keywords

    MNEs; development; import substitution; policy; FDI; Latin America; Asia;
    All these keywords.

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:rdg:jhdxdp:jhd-dp2015-05. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Marie Pearson (email available below). General contact details of provider: https://edirc.repec.org/data/bsrdguk.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.