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Globalization and development: an international business strategy approach

Robert Pearce*

This article seeks to reformulate the “colourful and fluid” early debate on the effects of foreign direct investment in two ways. Firstly, the wide range of separate specific concerns of the early debate are subsumed within four generic issues: efficiency, distribution, sovereignty, and growth and development. Secondly, the analysis is now structured around modes of analysis of transnational corporations, as the agents that carry out foreign direct investment. Transnational corporations are seen as using the freedoms of international transfers central to globalization in order to leverage competitively the differences of national (or other coherently-defined) economic units. Crucially this response to difference is analyzed as reflecting three potential strategic motivations: market seeking, efficiency seeking and knowledge seeking. The core of the article investigates how the adoption of different motivations by transnational corporations would affect performance in terms of the different generic issues. The synergies of this mode of analysis with trade policy (the implicit, or often very explicit, move to outward-oriented industrialization in the era of globalization) and new growth theory are also discussed. Key words: globalization, TNC strategy, efficiency, distribution, growth and development

Introduction The early debate on the role of foreign direct investment (FDI) in developing countries has been neatly characterized as

* Robert Pearce is at Reading University Business School. PO Box 218, Whiteknights, Reading, Berkshire, RG6 6AA. He is grateful for the comments made by two anonymous referees.

“colourful and fluid” (Balasubramanyam, 1985, p. 159). One reason for the colourfulness of this debate was its emergence within the politically-charged birth of development economics per se and related attempts to co-opt it into disparate wider political-economic...