International Business & Ethics
Globalization, Compliance, Corporate Responsibility voluntary and mandatory rules
Globalization, Compliance, Corporate Responsibility voluntary and mandatory rules
The continuum of Rules
How do rules affect corporate behavior?
What is the meaning of Globalization?
= Process of a worldwide integration of economic and social activities; active or passive development towards globalization
Drivers
(a) Advancement of Technologies
- ICT development; cheap and fast transportation of goods
(b) Reduction in Cross-trade Barriers
- Reduction or elimination of tariffs and quotas on the goods and services imported (following e.g. WTO agreements)
(c) Increase in Consumer Demand, due to
- an increase in the level of income and standard of living, and
- marketing campaigns with global outreach based on ICT
(d) High Competition
- Increase in competition in the domestic market compels organizations to go
global
What is a multinational Enterprise (MNE)?
The OECD definition (Dunning, 1993, p. 2)
-->MNEs „engage in foreign direct investment (FDI) and own or control value-adding activities in more than one country“
Alternative Definition (Smelser & Baltes 2001, p. 10197)
--> “The multinational corporation is a business organization whose activities are located in more than two countries and is the organizational form that defines foreign direct investment. This form consists of a country location where the firm is incorporated and of the establishment of branches or subsidiaries in foreign countries. ...”
What are critical aspects of globalization?
Globalization critics argue that ...
- Only the richest countries, which continue to dominate world trade at the expense of developing countries (DC), profit from globalization; the role of DCs in the world market is mostly to provide the North and West with cheap labour and raw materials.
- The wealth from inward investment will hardly ever benefit the local community. Often, profits are sent back to the country where the MNE is based. If it becomes cheaper to operate in another country, the MNE might close down the factory and make local people redundant.
- An absence of strictly enforced international laws means that MNEs may operate in DCs in a way that would not be allowed in their home country. They may pollute the environment, run risks with safety or impose poor working conditions and low wages on local workers.
- Globalization is a threat to the world's cultural diversity.
Problems of Globalization and Challenges for MNE?
Why International Political Economy (IPE) and not Global Political Economy (GPE)?
Critics:
"international" confuses nation with state
− State = political and geopolitical entity
− Nation = cultural and ethnic entity
But: "IPE has become synonymous with the field of study
What is International Political Economy (IPE)?
− Relatively new field: since early 1970s
− Interdisciplinary field of study: Politics / Political-Risk, Economics, Trade, Finance, International Institutions
− Focus on effects of globalisation. Reality of global supply chains.
− Who gets what, when, and how?
− Distribution of power in the global economy, e.g. Agenda setting. USA --> Global
Financial Regime, voting rights at IMF, WB, etc.
− Potential for states to engage in collaboration.
What are Multinational Corporations (MNC) / Transnational Corporations (TNC)?
A transnational corporation (TNC) is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others.
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Flashcards
The continuum of Rules
How do rules affect corporate behavior?
What is the meaning of Globalization?
= Process of a worldwide integration of economic and social activities; active or passive development towards globalization
Drivers
(a) Advancement of Technologies
- ICT development; cheap and fast transportation of goods
(b) Reduction in Cross-trade Barriers
- Reduction or elimination of tariffs and quotas on the goods and services imported (following e.g. WTO agreements)
(c) Increase in Consumer Demand, due to
- an increase in the level of income and standard of living, and
- marketing campaigns with global outreach based on ICT
(d) High Competition
- Increase in competition in the domestic market compels organizations to go
global
What is a multinational Enterprise (MNE)?
The OECD definition (Dunning, 1993, p. 2)
-->MNEs „engage in foreign direct investment (FDI) and own or control value-adding activities in more than one country“
Alternative Definition (Smelser & Baltes 2001, p. 10197)
--> “The multinational corporation is a business organization whose activities are located in more than two countries and is the organizational form that defines foreign direct investment. This form consists of a country location where the firm is incorporated and of the establishment of branches or subsidiaries in foreign countries. ...”
What are critical aspects of globalization?
Globalization critics argue that ...
- Only the richest countries, which continue to dominate world trade at the expense of developing countries (DC), profit from globalization; the role of DCs in the world market is mostly to provide the North and West with cheap labour and raw materials.
- The wealth from inward investment will hardly ever benefit the local community. Often, profits are sent back to the country where the MNE is based. If it becomes cheaper to operate in another country, the MNE might close down the factory and make local people redundant.
- An absence of strictly enforced international laws means that MNEs may operate in DCs in a way that would not be allowed in their home country. They may pollute the environment, run risks with safety or impose poor working conditions and low wages on local workers.
- Globalization is a threat to the world's cultural diversity.
Problems of Globalization and Challenges for MNE?
Why International Political Economy (IPE) and not Global Political Economy (GPE)?
Critics:
"international" confuses nation with state
− State = political and geopolitical entity
− Nation = cultural and ethnic entity
But: "IPE has become synonymous with the field of study
What is International Political Economy (IPE)?
− Relatively new field: since early 1970s
− Interdisciplinary field of study: Politics / Political-Risk, Economics, Trade, Finance, International Institutions
− Focus on effects of globalisation. Reality of global supply chains.
− Who gets what, when, and how?
− Distribution of power in the global economy, e.g. Agenda setting. USA --> Global
Financial Regime, voting rights at IMF, WB, etc.
− Potential for states to engage in collaboration.
What are Multinational Corporations (MNC) / Transnational Corporations (TNC)?
A transnational corporation (TNC) is generally regarded as an enterprise comprising entities in more than one country which operate under a system of decision-making that permits coherent policies and a common strategy. The entities are so linked, by ownership or otherwise, that one or more of them may be able to exercise a significant influence over the others and, in particular, to share knowledge, resources and responsibilities with the others.
