Could You Also Elaborate How the “Globalised Infrastructure” Would Bring Benefits to the Host Countries (Developed or Developing)
Host countries (developed and developing) will benefit from globalised infrastructure through the proper integration of their three levels of markets - financial markets, markets in goods and services and labour markets (Buckley & Ghauri, 2004). The authors went ahead to say that financial markets have achieved a high degree of integration globally, while same cannot be said of labour markets and there are notable resistance by national governments on the effort to achieve it (Buckley et al., 2001 cited in Buckley & Ghauri, 2004). Countries like China and India has benefitted largely from setting up globalised labour market infrastructure whereby MNEs relocate stages of production in China and service activities (e.g. call centres) in India. MNEs achieve this feat because of mechanisms in place ranging from “wholly owned FDI, licensing and subcontracting to market relationships” (Buckley & Ghauri, 2004).
Furthermore, the study of Globerman & Shapiro (2002) found that public institutions and policies which guide economic and social relations framework of nations which they termed governance infrastructure affect MNCs investment decisions and an affirmative governance infrastructure will imbibe “an effective, impartial and transparent legal system that protects property and individual rights; public institutions that are stable, credible and honest; and government policies that favour free and open markets”. The perception of protection from arbitrary appropriation encourages FDI flow and even domestic investment; rise in home grown MNC and encourages sunk cost investment by MNCs thereby making for efficient operation in host countries (Globerman & Shapiro, 2002).
The problem of poorly developed globalised government infrastructure is evident in the Nigerian economy, where corruption and weak policies do not protect foreign investors, embezzlement and capital flight by politicians and MNCs has further impoverished the economy. It is also common knowledge that
Furthermore, the study of Globerman & Shapiro (2002) found that public institutions and policies which guide economic and social relations framework of nations which they termed governance infrastructure affect MNCs investment decisions and an affirmative governance infrastructure will imbibe “an effective, impartial and transparent legal system that protects property and individual rights; public institutions that are stable, credible and honest; and government policies that favour free and open markets”. The perception of protection from arbitrary appropriation encourages FDI flow and even domestic investment; rise in home grown MNC and encourages sunk cost investment by MNCs thereby making for efficient operation in host countries (Globerman & Shapiro, 2002).
The problem of poorly developed globalised government infrastructure is evident in the Nigerian economy, where corruption and weak policies do not protect foreign investors, embezzlement and capital flight by politicians and MNCs has further impoverished the economy. It is also common knowledge that
References: Buckley, P, & Ghauri, P 2004, 'Globalisation, Economic Geography and the Strategy of Multinational Enterprises ', Journal Of International Business Studies, 2, p. 81, JSTOR Arts & Sciences IV, EBSCOhost, viewed 12 February 2013. Globerman, S, & Shapiro, D 2002, 'Global foreign direct investment flows: The role of governance infrastructure ', World Development, 30, 11, p. 1899-1919, Scopus, EBSCOhost, viewed 12 February 2013.