The role of multinational enterprises in global valuation

The role of multinational enterprises in global valuation PurposeThe research proposition of this paper is that multinational enterprises (MNEs) were important in the process of growth and divergence that took place in the world in the nineteenth and twentieth centuries. The rate of growth of GDP per capita was unprecedented, but it was coupled with an increasing gap between the developed and the developing countries. MNEs are even more important in the growth and convergence process that started at the beginning of the twenty-first century where the gap is closing. Global sourcing is the strategy that has led to closing the gap while high growth continues. The paper aims to discuss these issues.Design/methodology/approachThe study is based on macroeconomics general equilibrium model in an imperfect market and on looking at the inventive process as the driving process of the development and the location of MNEs. Using a financial economics model of assets and liabilities, it is shown that MNEs affect the geopolitical distribution of income and wealth through expanding their liabilities. The methodology is a combination of applying economic model and using historical and current data to motivate the use of the model and to validate the models and the conclusions derived from them.FindingsMNEs and major global companies before the name MNE was used were shaped by major macroeconomic processes like the inventive process and the same time they were the prime movers of the two major economic processes of the last 200 years: growth and divergence and growth and convergence. The ideas-led growth model shows why MNEs are becoming larger. As MNEs became bigger they start to import inputs through value maximizing strategy of global sourcing. This led to transfer of value to suppliers in emerging markets that grow over time and eventually it led to new MNEs from emerging markets large countries like China and from smaller countries in Asia and elsewhere. The growth convergence process and the resulting changes in the geopolitical distribution of MNEs is assisted by rapid changes in technology that reduces transactions cost. The continuation of rapid changes in transactions costs is likely to change the current structure, strategy and the location of MNEs and may reverse the growth convergence process once more.Originality/valueThe study begins with aggregate macroeconomic processes and relates them to the development of MNEs and in particular to the development of MNEs from emerging markets. It highlights the importance of global value chains and global sourcing in the process of growth and divergence and the turning of the “Wheel for Fortune” toward China and India as it has been prior to the sixteenth century. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Emerging Markets Emerald Publishing

The role of multinational enterprises in global valuation

International Journal of Emerging Markets, Volume 15 (1): 20 – Mar 13, 2019

Loading next page...
 
/lp/emerald-publishing/the-role-of-multinational-enterprises-in-global-valuation-ZcTEVicm0v
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1746-8809
DOI
10.1108/IJOEM-03-2018-0116
Publisher site
See Article on Publisher Site

Abstract

PurposeThe research proposition of this paper is that multinational enterprises (MNEs) were important in the process of growth and divergence that took place in the world in the nineteenth and twentieth centuries. The rate of growth of GDP per capita was unprecedented, but it was coupled with an increasing gap between the developed and the developing countries. MNEs are even more important in the growth and convergence process that started at the beginning of the twenty-first century where the gap is closing. Global sourcing is the strategy that has led to closing the gap while high growth continues. The paper aims to discuss these issues.Design/methodology/approachThe study is based on macroeconomics general equilibrium model in an imperfect market and on looking at the inventive process as the driving process of the development and the location of MNEs. Using a financial economics model of assets and liabilities, it is shown that MNEs affect the geopolitical distribution of income and wealth through expanding their liabilities. The methodology is a combination of applying economic model and using historical and current data to motivate the use of the model and to validate the models and the conclusions derived from them.FindingsMNEs and major global companies before the name MNE was used were shaped by major macroeconomic processes like the inventive process and the same time they were the prime movers of the two major economic processes of the last 200 years: growth and divergence and growth and convergence. The ideas-led growth model shows why MNEs are becoming larger. As MNEs became bigger they start to import inputs through value maximizing strategy of global sourcing. This led to transfer of value to suppliers in emerging markets that grow over time and eventually it led to new MNEs from emerging markets large countries like China and from smaller countries in Asia and elsewhere. The growth convergence process and the resulting changes in the geopolitical distribution of MNEs is assisted by rapid changes in technology that reduces transactions cost. The continuation of rapid changes in transactions costs is likely to change the current structure, strategy and the location of MNEs and may reverse the growth convergence process once more.Originality/valueThe study begins with aggregate macroeconomic processes and relates them to the development of MNEs and in particular to the development of MNEs from emerging markets. It highlights the importance of global value chains and global sourcing in the process of growth and divergence and the turning of the “Wheel for Fortune” toward China and India as it has been prior to the sixteenth century.

Journal

International Journal of Emerging MarketsEmerald Publishing

Published: Mar 13, 2019

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off