The Impact of Foreign Direct Investments (FDI) From Democratic Countries to Centrally Planned Economies

THE IMPACT OF FOREIGN DIRECT INVESTMENTS (FDI) FROM DEMOCRATIC COUNTRIES TO CENTRALLY PLANNED ECONOMIES

Despite the recent economic slump and subsequent reductions and fluctuations of investment activities undertaken by multinational enterprises (MNEs) in host markets, the overall volume of foreign direct investment (FDI) has significantly grown over the last three decades. The major proportion of the FDI flows from democratic to centrally planned economies with the latter currently receiving huge amounts of inward FDI from the West. A representative example of this flow is China. China is often referred to as the factory of the world and/or the black hole of inward FDI. According to UNCTAD (2001, 2011), the recorded figure for 2010 revealed a more than doubling in the increase of China’s inward FDI (i.e., US$105.7 billion) since the year 2000 (US$40.7 billion). The same information also reveals that inward FDI in Vietnam dramatically increased from an annual average of US$651 million between 1989 and 1994 to US$ 2.1 billion in 2000 and US$8.2 billion in 2010.

A more direct example that clearly demonstrates the interaction between democratic and centrally planned economies is the Korean case. Based on mutual agreements between South (democratic) and North (centrally planned) Korean governments, South Korea established an industrial complex through FDI in Gaesung, North Korea. A number of South Korean MNEs participated in the project in order to exploit their capital and technology in combination with North Korea’s cheap labor force. As of March 2012, South Korean MNEs invested in a wide range of industrial sectors, such as textile, chemical, machinery, metal engineering, electricity & gas, electronics, food products, paper & wood, ceramics and so on. Since its establishment in 2008, the stock of production exceeded US$1 billion in September 2010 and approximately 50,000 North Koreans were employed as of January 2012 (EncyKorea, 2013). As the first industrial complex inaugurated jointly by South and North Korea, it has been a mutually beneficial contribution to political reconciliation, economic development, economical collaboration and cultural exchange.

However, we do not know enough that what impact this cooperation between democratic and centrally planned economies has had on the political, economic development, social and cultural areas. In this regard, the aim of this special issue is to bring together theoretical and empirical advancements examining the impact of FDI from disparate economies. We seek both theoretical and empirical papers that may address, but are not limited to, the following list of potential research questions:

• Does FDI from democratic countries trigger economic growth in centrally planned countries? How does FDI from the former economies function as a vehicle to enhance economic development in the latter?
• Who obtains more benefits from FDI between democratic and centrally planned economies?
• Is the impact of FDI different in different centrally planned economies and are there different patterns of economic development?
• What are the key factors promoting positive spillover effects of FDI in centrally planned economies?
• What are the primary conditions that inhibit the negative economic development outcomes from inward FDI in these countries?
• How do Western MNEs contribute to social evolution, particularly in centrally planned countries?
• What is the effect of profit remittance by Western MNEs on these economies? What encourages Western MNEs to re-invest profits in these markets?
• Does foreign investment induce political transitions and institutional changes in centrally planned countries?
• What is the extent to which Western MNEs influence cultural evolution in these countries?
• Are democratic economies influenced by outward investments into centrally planned countries?
• Does the economic cooperation between democratic and centrally planned economies affect national / country of origin image?

Submission Instructions:

The deadline for submissions is December 31, 2014. Thunderbird International Business Review, including style guidelines, please visit the Thunderbird International Business Review website at: http://tibr.thunderbird.edu/submission.

All submissions will be subject to the regular double-blind peer review process at the Thunderbird International Business Review. The guest editors are seeking reviewers for this issue and are soliciting nominations and volunteers to participate as reviewers. Please contact the guest editors to volunteer or nominate a reviewer.

More Information:

To obtain additional information, please contact the guest editors:

Pervez N. Ghauri, King’s College London, UK (pervez.ghauri@kcl.ac.uk)

Byung Il Park, Hankuk University of Foreign Studies, South Korea (leedspark@hufs.ac.kr)

References

EncyKorea (2013), Industrial complex established in Gaesung. Available http://terms.naver.com/entry.nhn?docId=1821118&cid=1599&categoryId=1599

UNCTAD (2001). World investment report: Promoting linkages. Geneva: United Nations.

UNCTAD (2011). World investment report: Non-equity modes of international production and development. Geneva: United Nations.