Reference no: EM131042037 , Length: word count:1750

Case Study

Outward FDI does not necessarily cost domestic employment of MNEs at home: Evidence from Japnese MNEs by In Hyeock Lee, Shige Makino and Eunsuk Hong* (May, 2015)

Recent study explores this argument with a sample of 604 Japanese MNEs that had established 2,345 foreign affiliates operating in 22 industries (including both manufacturing and service sectors) across 58 countries from 1991 to 2010:

- Outward FD1 of Japanese MNEs reduced their domestic employment levels in Japan when Japanese MNEs conducted labor-seeking FDI to (1) relocate the labor-intensive, home-based production base to foreign countries with lower labor costs or (2) follow downstream customers to serve them in proximity using local employees.

- Outward FDI of Japanese MNEs increased their domestic employment levels in Japan when:

- Japanese MNEs conducted market-seeking FDI to (1) further secure access to immobile resources necessary for generating new markets in host countries, (2) establish foreign sales affiliates to serve neighboring foreign countries, or (3) set up regional sales headquarters in economic integration blocks.

- Japanese MNEs conducted strategic asset-seeking FDI to (1) acquire indirect market/scientific information or (2) conduct direct research-and-development activities.

- Japanese MNEs conducted efficiency-seeking FDI to spread risks across multiple countries through financing- and currency-hedging.

In general, the findings suggest that outward FDI of Japanese MNEs increases their domestic employment when it enhances the MNEs' competitive advantages and hence further expands domestic operations, whereas it reduces domestic employment when it involves a transfer or relocation of domestic operations in foreign countries.

Policy implications from the evidence are two-fold. For general policy makers striving to increase domestic employment, foreign investment policy should focus on the promotion of competitive-advantage-enhancing outward FDI that results in new markets, new knowledge or spread-out risks. While governments have been proactive in attracting inward FDI to generate new jobs within their national borders through a transfer of management resources, business systems and new technology from foreign investors, the study shows that the promotion of competitive-advantage-enhancing outward EDI is also an effective way to boost the domestic employment of MNEs at home and can be a new policy focus when countries undergo a process of industrial restructuring. In the Japanese context, the'challenge is how to build effective incentive structures to promote competitive-advantage-enhancing outward FDI, while ensuring that unskilled Japanese workers are retrained instead of resorting solely to unemployment compensations.

The bottom line is that outward FDI does not always produce a hollowing-out effect. Policy on outward FDI should be positioned as an integral part of a country's strategy for economic development and growth.

A. General: (Completeness, word length, special requirements, etc)

Construction: Structure, introduction, conclusion, visual presentation, etc.

- Have you provided an introduction for each item?
- Have you concluded by summarising your argument at the end of each item?
- Is the work well presented visually in terms of layout, fonts, and spacing, etc?

Intellectual Argument: (Evidence used, clarity and structure of argument, etc.)

- Intellectual argument
- Have you supported your statements with appropriate "evidence"?
- Is the argument clear and structured?

Source Materials: (Please refer to guidance you have received in Module Guide and Induction. Proper acknowledgment, correct identification of authors, etc, complete references or bibliography, use of Harvard system standards)

- Are the materials you have used properly acknowledged in your work? Does the main body of your work correctly identify authors and other detail (dates and where appropriate page references) as specified in the Harvard system standards?

- Can all your references be traced to your bibliography?
- Has the bibliography been prepared to Harvard system standards?

B. Overall Review: (Re-read, assess impact, etc.) Self-assessment briefing checklist: worked example
- Re-read the assignment brief. Have you answered the brief set? Have you addressed every aspect of it?
- Refer to the previously issued grade descriptors and decide (realistically) the grade you want to achieve. (Honestly now) do the descriptions associated with that grade correspond with your work? If not what adjustments do you need to make?

Assessment Brief/ Task

In this world nothing can be said to be certain, except death and taxes, (Benjamin Franklin), yet many multinational enterprises (MNES) appear not to be paying their fair share of the latter. Evaluate the arguments regarding the share of taxes paid by MNEs and assess the impact that national governments and supranational bodies have had on ways to increase the amount of tax that MNEs pay.

Case study question

In answering the case study it is important that you draw upon information in the case study as well as further developing your arguments and adding additional material.

For Q1

The costs and benefits are numerous and we are not going to list them all here, but some reference to employment, productivity effects, balance of trade effects might be listed in the benefits, though there could also be costs in terms of job losses, closure of domestic firms, increases in imports etc. You need to consider [DI theories in answering this part too, in particular the OLI and Spillover theory come to mind. The balance between costs and benefits should be fairly equal. OLI might be behind the firms move to a host economy, buy the ownership advantages might not be internalised. Mode of entry important?

Here you might consider the concept of absorptive capacity within spillover theory and perhaps some reference to institutional theory. You might also reflect on whether the source country of the investment is important. Clustering and education may also play a role as might the extent of the supply chain in the host economy.FDI and its effect on country growth - see the literature.

Essay Guide

Evaluate the arguments regarding the share of taxes paid by MNEs and assess the impact that national governments and supranational bodies have had on ways to increase the amount of tax that MNEs pay.

Part

Evaluate the arguments regarding the share of taxes paid by MNEs:

Evaluate means: Give your verdict as to what extent a statement or findings within a piece of research are true, or to what extent you agree with them. Provide evidence taken from a wide range of sources which both agree with and contradict an argument. Come to a final conclusion, basing your decision on what you judge to be the most important factors and justify how you have made your choice.

Theories you're looking at: Taxes paid by MNEs (how profits are transferred, what amount is kept for taxation etc.)

Part 2

Assess the impact that national governments have had on ways to increase the amount of tax that MNEs pay.

Assess means:

Weigh up to what extent something is true. Persuade the reader of your argument by citing relevant research but also remember to point out any flaws and counter-arguments as well. Conclude by stating clearly how far you are in agreement with the original proposition.

Theories you're looking at: impacts of an increase tax on MNE profit by the national government.

Part 3

Assess the impact that supranational bodies have had on ways to increase the amount of tax that MNEs pay.

Theories you're looking at: impacts of an increase tax on MNE profit by the supranational bodies.

Please find the attached assignment.

Etch assignment will be only 1750 words as per the instruction.

please check the attached for more information and guide line.