mne impact on local economy - group 5 - seminar 5 - test 6
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Welcome to the Boardroom of !Tech Innovation Corporations Inc!
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TODAY’S CASE: THE MULTINATIONAL ENTERPRISE IMPACT ON THE LOCAL ECONOMY
CONSULTANTCY TEAMS
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WE WILL DIVIDE YOU INTO YOUR REGULAR SEMINAR GROUPS - BUT, TODAY YOU ARE CONSULTANTS!
PROBLEM
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ESTABLISHED CLUSTER IN THE U.S EMERGING CLUSTER IN CHINA
OR
1. WHAT TO THINK OF? 2. HOW TO DO IT? 3. WHERE TO GO?
• SWEDISH TECHNOLOGY COMPANY • ESTABLISHING A NEW SUBSIDIARY ABROAD! • WHICH CLUSTER SHOULD WE CHOOSE?
AGENDA
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BACKGROUND
ESTABLISHED CLUSTER
EMERGING CLUSTER
OTHER IMPACTS MEYER
HOLM
SUMMARY
CONSULTATION
DECISION
PRIZE
HOLMSTRÖM
TRADITIONAL FDI
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”THE PIPELINE MODEL OF SPILLOVERS”
3. SUBSIDIARY BEHAVIOUR IS SHAPED BY HQ!
1. HQ INNOVATES FSA!
2. TRANSFER FSA VIA SUBSIDIARY AND FDI!
EFFECT: VERTICAL SPILLOVERS (RELATIONS)
4. NO CLUSTER!
MODERN FDI
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2. SPILLOVERS BETWEEN SUBSIDARY AND DYNAMIC ENVIRONMENT!
4. SUBSIDIARY INNOVATES FSA ASWELL!
1. TAKE THE ENVIRONMENT MORE INTO CONSIDERATION!
EFFECT: VERTICAL (RELATIONS)
+ HORIZONTAL SPILLOVERS (COMPETITION)
3. CLUSTER!
”SPILLOVERS IN CLUSTERS”
IMPACT ON THE ENVIRONMENT
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KISTA, SWEDEN
CHONGQING, CHINA
ESTABLISHED DYNAMIC ENVIRONMENT IN
DEVELOPED ECONOMY
EMERGING DYNAMIC ENVIRONMENT IN EMERGING
ECONOMY
MEYER HOLM
EXAMPLE #1 EXAMPLE #2
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KISTA, SWEDEN
ESTABLISHED DYNAMIC ENVIRONMENT
EXAMPLE #1
THE KISTA EXAMPLE
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• KISTA SCIENCE CITY AB – NON PROFIT ORGANIZATION
• STRONG DYNAMIC ENVIRONMENT
• QRODO AB – startup service for Sports Broadcasts
EXAMPLE:
• Went into an already established cluster
THE KISTA EXAMPLE
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APPLYING HOLM’S MODEL ON QRODO:
H1+
H2-
H3-
H4+
H5+
H6+
THE KISTA EXAMPLE
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CHONGQING
EMERGING DYNAMIC ENVIRONMENT
EXAMPLE #2
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APPLYING MEYERS MODEL:
THE CHONGQING EXAMPLE
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• EMERGING ECONOMIES = INTERESTING
CHONGQING
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THE EVOLUTION OF CLUSTERS IS OFTEN DRIVEN BY A ”FLAGSHIP FIRM”
THE CHONGQING EXAMPLE
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• INTRA-INDUSTRY SPILLOVERS
DEMONSTRATION EFFECTS
• KNOWLEDGE DIFFUSION
MOVEMENT OF LABOUR
THE CHONGQING EXAMPLE
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TECHNOLOGY GAP ABSORPTIVE CAPACITY vs.
THE CHONGQING EXAMPLE
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MNE-IMPACT ON EMERGING ECONOMY!
LONG TERM vs. SHORT TERM
THE CHONGQING EXAMPLE
POSITIVE vs. NEGATIVE
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• INTER-INDUSTRY SPILLOVERS
LINKAGES:
FORWARD BACKWARD
THE CHONGQING EXAMPLE
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COMPETITION = STIMULUS
THE CHONGQING EXAMPLE
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APPLYING MEYERS MODEL:
ENVIRONMENTAL IMPACT
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• POLLUTION HALO EFFECT
• POLLUTION HAVEN EFFECT
• GLOBAL STANDARDS?
Transfer environmental friendly technology
Motivation: 1) Production Efficiency, 2) Reputation, 3) Avoiding Future Regulatory changes
Transfer outdated technology
Motivation: 1) Cost-saving
INSTITUTIONAL IMPACT
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• FDI IMPACT ON INSTITUTIONS
• INSTITUTIONAL IMPACT ON FDI
• Influencing laws and regulations • Lobbying
Legal code and law enforcement: • Labour market institutions • Capital market institutions • Environmental regulation and enforcement • Competition and industry regulation • Education systems • Special economic zones
SOCIAL IMPACT
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• LABOUR STANDARDS & WAGES
• BUSINESS ETHICS
• Bargaining Power
Factors influencing the lowering of standards: • Cost-reduction • Regulatory differentials • Location is not ”sticky” – easy to relocate
Factors influencing the increase of standards: • Reputation • Retaining qualified staff
NORMATIVE VIEW INSTRUMENTAL VIEW vs.
MACROECONOMIC IMPACT
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• UNEMPLOYMENT RATE
• CONSUMPTION & PRODUCTION
• MONETARY POLICIES
SUMMARY
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SUMMARY: EXAMPLES
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ESTABLISHED DYNAMIC ENVIRONMENT IN A DEVELOPED ECONOMY
EMERGING DYNAMIC ENVIRONMENT IN AN EMERGING ECONOMY
• ENVIRONMENT: MORE COMPETITIVE • ENVIRONMENT: LESS COMPETITIVE
• INSTITUTIONAL DISTANCE: MORE KNOWN • INSTITUTIONAL DISTANCE: LESS KNOWN
• FOLLOW: ADAPT TO ENVIRONMENT • LEAD: CREATE THE ENVIRONMENT
• ECONOMIC GROWTH: LOWER • ECONOMIC GROWTH: HIGHER
VS.
SUMMARY: THEORY
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MORE FACTORS THAN STRICTLY BUSINESS:
ENVIRONMENTAL
INSTITUTIONAL SOCIAL
MACRO
MEYER
HOLM
CONNECTION BETWEEN:
COMPETITIVE (DYNAMIC)
ENVIRONMENT
HIGHER COMPETENCE
IMPACT ON LOCAL
ECONOMY
POLITICIZING MNC?
(INST. THEORY)
NETWORKING MNC?
(BNT THEORY)
CRITIQUE
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MEYER
HOLM
• NARROW MINDED: TOO FEW VARIABLES FOR ”SUBSIDIARY’S IMPACT ON LOCAL LEVEL”. 1) ONLY INVESTMENTS? 2) HOW WAS IT MEASURED? 3) OTHERS? (PEOPLE? KNOWLEDGE?)
• SHALLOW: DOES NOT EXAMINE ALL OTHER FACTORS, RATHER PROPOSE FUTURE RESEARCH.
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15 MINUTES COFFEE BREAK!
After the break: Consultation time!
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OR
CONSULTATION TIME!
ESTABLISHED CLUSTER IN THE U.S EMERGING CLUSTER IN CHINA
ESTABLISHED DYNAMIC ENVIRONMENT
DEVELOPED ECONOMY
EMERGING DYNAMIC ENVIRONMENT
EMERGING ECONOMY
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#1
Which cluster should we choose according to the theories by: 1) Holm and 2) Meyer? Will it differ? Will
it be the same? Why?
ESTABLISHED DYNAMIC ENVIRONMENT EMERGING DYNAMIC ENVIRONMENT
VS.
DEVELOPED ECONOMY EMERGING ECONOMY
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#2
Would your choice differ if the cluster in the emerging economy was more established than in
the developed economy? Why? Why not?
ESTABLISHED DYNAMIC ENVIRONMENT EMERGING DYNAMIC ENVIRONMENT
VS.
DEVELOPED ECONOMY EMERGING ECONOMY
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#3
Holm said during the lecture that there is a tradeoff between: HQ control vs. Subsidiary development. What will HQ role be in the future if this statement is true?
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And the winning Consultant Team is…
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Thank You!