MNCs as a Factor for Governance Modernizing in the Twentieth Century

MNCs as a Factor for Governance Modernizing in the Twentieth Century

Arkhipov Aleksey (South Federal University, Russia) and Eteri Rubinskaya (The Russian Presidential Academy of National Economy and Public Administration – South, Russia)
Copyright: © 2018 |Pages: 21
DOI: 10.4018/978-1-5225-3856-1.ch002
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Abstract

Deepening integration of countries within the world economy demands from the states to develop internal and external policies which would be at the same time adequate to challenges of the global economy, to corporate interests and also to national development priorities. Thus, the new concept of state regulation of transnational entrepreneurship must take into account the network structure of organization and significant IT involvement in all transborder operations. In the research presented further we have analyzed the approaches to theoretical definition of transnational entrepreneurship along with the conditions for its formation and spread. We also attempt to determine the economic efficiency of network organization of transnational business under the conditions of global economic instability and the need for permanent development. The major problems related to the interactions of corporations and states are outlined, and the potential development scenarios for these relations are suggested. The role of today's transnational corporations in international capital flow and international labour distribution is explained; the meaning and value of such corporations for the world economy is assessed. The authors also offer for consideration the stages in Russian transnational entrepreneurship development along with recommendations concerning the development and implementation of national economic strategy taking into account the weight of transnationalization factor and the priorities of economic security.
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Literature Review

One of the first economists to dedicate attention to international migration of capital and formation of transborder production & distribution system was the famous English economist John Stuart Mill (1863). He came to the conclusion about the profitability of granting credits to foreign countries for their future sales and also about the profitability of producing some goods abroad instead of domestically. Mill also proved that crediting foreign buyers and creating enterprises in other countries in order to get cheaper raw materials and semifinished goods needed for own production inside a country which is exporting capital, is actually promoting the expansion of foreign trade.

Later on, the most prominent representatives of the Stockholm School (neoclassical economics), Eli Heckscher and Bertil Ohlin (2007) took up Mill’s ideas and developed them further in their theory of production factors. More specifically, Heckscher grounded the theorem that in the process of international exchange of goods and production factors there arises a tendency for prices equilibrium in various countries. Ohlin explained the movements in production factors by the uneven demand for them in different countries. Capital tends to relocate to places where its marginal productivity is higher, while borrowed money capital the marginal productivity of which is determined by the borrowing rate, tends to move from the countries with lower rates to the countries with higher interest rates.

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