Parental Supervision amplifies the research Theodore Moran first
presented in Foreign Direct Investment and Development (IIE 1998),
assessing the opportunities and dangers that foreign direct
investment may present to the growth of developing countries. Moran
uses almost 50 percent more case studies than the earlier work to
examine two types of foreign investments: (1) those that are
tightly integrated into the parent firm's strategy and (2) those
that are hindered by joint-venture and domestic-content
requirements. The study is a comparison between these two types of
foreign operations -- how backward linkages to local suppliers,
operations of local affiliates, and the spillovers and
externalities in the host economy differ from one type of foreign
operation to the other.
In tightly integrated networks, not only is the performance of
local affiliates superior and upgraded more continuously, but also,
surprisingly, the backward linkages from the affiliates to local
suppliers tend to be larger and more robust. Moran reviews
contemporary efforts to measure the impact of simultaneous trade
and investment liberalization on host country welfare, finding that
the magnitude of both the benefits and the costs may be far greater
than conventional wisdom suggests.
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