Foreign Direct Investment and Interstate Military Conflict
2008; Columbia University; Volume: 62; Issue: 1 Linguagem: Inglês
ISSN
0022-197X
Autores Tópico(s)State Capitalism and Financial Governance
ResumoOn 8 December 1996, Thomas L. Friedman published his Golden Arches Theory of Conflict Prevention, which states that, No two countries that both have McDonald's have ever fought war against each other. The rationale, according to Friedman, is that when country reaches the level of economic development required to support McDonald's, people in that country will stop fighting wars for fear of the resultant economic and personal losses. McDonald's, as global foodservice retailer, represents not just quality standard of living, but also, in the words of James Cantalupo, president and chief executive officer of McDonald's International, a symbol of something--an economic maturity and [openness] to foreign investments. (1) Since then, Friedman's claim, along with the publication of his popular book, The Lexus and the Olive Tree: Understanding Globalization, has generated enormous interest and attracted scrutiny. (2) For the purpose of this essay, if McDonald's is viewed as symbol of foreign investment, interesting questions arise regarding the relationship between foreign direct investment (FDI) and interstate military conflict. Is it the presence of McDonald's that induces interstate peace? Or is it the absence of interstate military violence that leads to McDonald's investment? For Friedman's claim to be valid, the presence of McDonald's should induce peace rather than the other way around. But in reality, capital typically evades violence. (3) Scholars in international relations, business and economics have concerned themselves with these difficult questions before, but not to sufficiently detailed level of analysis. This essay will examine some key positions, arguments and evidence in recent academic scholarship on whether foreign investment mitigates interstate violence, as well as whether interstate conflict deters investment. Evidence will be offered using new data on bilateral foreign investment flows and militarized interstate disputes. At time when international production--widely viewed as one of the most salient aspects of globalization--has been increasing in volume and expanding in scope, many developing countries compete to attract foreign capital, the relationship between FDI and interstate peace is timely and significant topic. (4) DEFINITION, ATTRIBUTES AND GROWTH OF FOREIGN DIRECT INVESTMENT A multinational corporation (MNC) organizes production of goods and services in more than one country, involving the transfer of assets or intermediate products within the investing enterprise and without any change in ownership. (5) Foreign direct investment is the purchase of physical assets or significant amount of the ownership of company in another country to gain measure of management control. (6) About three-quarters of International Monetary Fund (IMF) member countries use the 10 percent rule to define foreign direct investment in data collection--that is, 10 percent or more of the ordinary shares, voting power or the equivalent establishes direct investment relationship. (7) Scholarship in international business suggests widely cited ownership, localization and internalization (OLI) paradigm to explain why national firms become transnational. It is said that they do so to exploit three types of advantages: (1) firm's ownership advantages derived from its control over tangible assets such as land or factory equipment and intangible assets such as product innovations, management practices, marketing techniques and brand names; (2) the firm's internalization advantages resulting from its hierarchical control of cross-border production; and (3) the firm-perceived location-specific advantages based on the characteristics of host countries in terms of their economic environment or government policies. (8) The nature and logic of FDI define two important, relevant attributes: the ex post illiquid nature of investment and cross border jurisdiction. …
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