MNEmerge Newsletter September 2016

How MNEs can impact on global development?

The MNEmerge and GLOBAL VALUE projects organised a joint professional development workshop to present the results and discuss about the impacts of MNEs on the global development in the annual Academy of Management conference. The Academy of Management is one of the world leading and most valued conferences in the field of management and organisational studies. The annual meeting gathers together more than 10 000 academics, scholars, and professionals. The 76th Annual Meeting of the Academy of Management was held on August 5-9, in Anaheim, California, the USA.

The professional development workshop gathered around 40 participants to listen the insights and take part in the lively round table discussions about the impacts of MNEs in sustainable development in the world. The presentations were based on the results of two large EU FP7 funded research projects: MNEmerge led by Lappeenranta University of Technology, and GLOBAL VALUE led by WU Vienna. The main question in the professional development workshop was “How multinational corporations can impact on global development?” In the projects this is guided by the UN’s sustainable development goals which urge us, and MNEs, to fight for poverty reduction, equality, clean water and sanitation, as well as affordable and clean energy, among others.

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MNEs should connect their core business to socio-economic development, the well-being of people, and the environment to have an impact on sustainable development. Companies need a clear understanding of what they are responsible for. They will need a clear picture of the whole system with different ambiguities, trade-offs, and systemic links. Forming this picture requires multi-level evaluation systems and linkages based on corporate, regional, and national data.

In developing countries, MNEs are blamed for serving elite population and forcing local governments to enable the use of resources for their advantage without sharing knowledge with local firms and stakeholders. However, in theory, MNEs should have positive and direct productivity effects when operating in developing markets. MNE linkages to local firms should increase the productivity and efficiencies of the firms and upgrade their capabilities and prospects. MNEs’ operations also have spill over effects by which they influence performance and behaviour of local firms through demonstration effects, increased competition and labour turnover, and capability enhancement.

Project findings show that in most cases local firms, linked to MNEs, benefit from MNE presence in a country. The MNEs’ presence particularly influences the capabilities, efficiency and wage levels of local individuals in these industries. The results show that MNEs are willing to share generic type of know-how with local firms but not advanced or high-tech knowledge. It is also notable that MNEs are not particularly interested in sustainable development or poverty reduction in local markets and are more interested to achieve the goals set by their HQs. In most cases, host country government provides incentives to attract FDI. The results also show that the role of host country government in initiating linkages between MNEs and local development is very crucial. Local governments should encourage MNEs to play a role in development and capability enhancement of local firms. They should also discourage monopolistic practices by MNEs and regulate polluting and adverse environmental practices to promote the sustainable and positive socio-economic development in a country.

At the firm level, MNEs should focus on the corporate brand and integrate poverty reduction into the corporate agenda. They should also be able to engage their distribution network into CSR initiatives and incorporate capability enhancement into industrial practices. The results show that MNEs can do good for themselves while doing good for sustainable development. Reputational gains can reach not only their target beneficiaries, but far beyond, their mainstream consumers. Well communicated and managed CSR agenda is the key for the sustainable impact and can have a positive influence on consumer perceptions and strengthen consumer purchase intentions.

By Pekka Torvinen, Lappeenranta University of Technology, Finland

The text is based on the presentations given in the professional development workshop by: Norma Schönherr, WU Vienna, Austria; Pervez Ghauri, University of Birmingham, UK; George Essegbey, Science and Technology Policy Research Institute (STEPRI), Ghana; Suraksha Gupta, University of Kent, UK and Eduardo Urias, UNU-MERIT, the Netherlands; and Rushva Parihar, UNU-MERIT, the Netherlands.

Stay tuned for the upcoming MNEmerge events

The MNEmerge team will organise several events during the autumn 2016, including regional stakeholder workshops in Brazil, Ghana and India. More information will be announced later.

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