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1、MULTINATIONAL SOURCING, SUSTAINABLE AGRICULTURE, AND ALLEVIATION OF GLOBAL POVERTYJonathan P. DohDirector, Center for Responsible Leadership and GovernanceCollege of Commerce and FinanceVillanova University800 Lancaster AveVillanova, PA 19085Tel: (610) 519-7798Fax: 610-519-6566E-mail: jonathan.dohvi
2、llanova.eduIn this paper, I propose proactive management of MNE sourcing as a possible contributor to global poverty alleviation. Drawing on and extending research on development economics, international business, and ethics and social responsibility, I suggest MNEs may be in a position to leverage
3、their role as consumers of unfinished or semi-finished products to promote sustainable economic development in emerging economies. I report on several nascent initiatives in sustainable agriculture that appear to reflect this proposed role, and discuss both constraints to and potential facilitators
4、of wider-spread efforts.Key words: poverty, MNE, international business, global sourcing MULTINATIONAL SOURCING, SUSTAINABLE AGRICULTURE, AND ALLEVIATION OF GLOBAL POVERTYPoverty continues to be a vexing and pervasive problem for the global commons. Although poverty has been dramatically reduced in
5、many parts of the world, a quarter of the worlds people remain in severe poverty (UNDP, 2002). An estimated 2.8 billion persons, roughly 45 percent of the worlds population, live on less than $2 dollars per day, and 1.2 billion, or about 20 percent of all humans, receive less than $1 per day, the ge
6、nerally accepted international level of absolute poverty (World Bank, 1999). About 1.1 billion persons live without access to safe drinking water, and 840 million adults and children are severely undernourished. Multinational enterprises (MNEs) are not typically viewed as significant players in the
7、fight against global poverty. Yet, MNEs have become increasingly intertwined with many facets of social and economic life. Indeed, they have often been at the center of debates regarding relationships and obligations between the developed and developing world. MNEs are often viewed as the agents thr
8、ough which the ideals and practices of western market capitalism are transmitted to developing countries. By some accounts and using some measures, this process has assisted in the economic improvement of impoverished regions of the world. Other interpretations suggest that globalization and the tra
9、nsnational penetration by MNEs of developing markets has both exacerbated existing social and economic problems and contributed to new ones. Both of these perspectives generally position multinationals as exporters to and/or investors in developing host countries. One role of some MNEs that of sourc
10、ing agent for purpose of purchasing goods for additional processing, marketing, and distribution is somewhat less explored. In this paper, I investigate MNE sourcing strategies as a possible positive contributor to global poverty alleviation. Drawing on and extending research on development economic
11、s, international business, and stakeholder management, I propose a normative and instrumental theory that suggests how MNEs can use their role as “consumers” of often unfinished or semi-finished inputs into final production to contribute to global poverty alleviation. This consumption can be part of
12、 an internal supply chain in which MNEs manage the entire production and distribution process, or via sourcing from sub-contractors. Such changes may contribute to poverty alleviation through shifting or stimulating higher value-added activities to poorer regions, and in so doing, accelerating econo
13、mic development. In practice, these activities have often been provoked by pressure from nongovernmental organizations (NGOs) and consumers of final products in developed country markets, but may be increasingly motivated by potential competitive benefits to the MNE resulting from product differenti
14、ation or other factors. In addition, MNEs may serve as a market intelligence channel through which producers can learn about market trends and preferences in developed country markets. I begin with a brief review of the history of FDI in emerging economies, summarizing both the neoclassical argument
15、s supporting the benefits of FDI to third world growth and development, as well as critiques that have focused on imbalances and dependencies associated with that investment. I then discuss contemporary concerns regarding the perceived negative spillovers of economic globalization that have placed p
16、ressure on MNEs to improve their social and environmental contributions in developing countries. Next, I propose an extension of the international product lifecycle as a framework for understanding how MNEs might accelerate the shift of value-added investment or sourcing activities in emerging econo
17、mies.In the following section, I identify several literatures drawn from philosophy, economics, and management to provide a range of normative and instrumental justifications for this process. I suggest that there are many of caveats associated with the success of these activities, suggesting the ne
18、cessity of several safeguards namely social responsibility codes of conduct to ensure that some firms do not free ride on the investments of others.I then review several cases in which MNEs have stimulated higher value added production in developing country markets through their sourcing and purchas
19、ing power. I focus on the agricultural sector because it is in this sector that globalization of production has had particularly radical (and often disruptive) impacts on developing countries, but which also promises the potential for productive and sustainable trading relationships that are benefic
20、ial to both developed and developing countries. Specifically, I analyze the sustainable coffee movement, the fair trade and “better bananas” initiatives, and the forest products stewardship certification process. I show how MNEs, in response to external pressure and their internal strategic marketin
21、g management, have used their market power to stimulate value added production and prompt changes in processes leading to more sustainable agricultural practices. These efforts have the potential to generate direct and indirect social and economic benefits (higher value-added production in growing c
22、ountry, increased income for farmers, formation of cooperatives, slowing of urbanization/preservation of agricultural opportunities) and to contribute to the conservation of scarce resources (such as less use of fossil fuels in the agricultural production process, improved natural habitats for wildl
23、ife, reduced use of pesticides or fertilizer, preservation of natural sources of drinking water). GLOBALIZATION, INTERNATIONAL BUSINESS, ECONOMIC DEVELOPMENT, AND GLOBAL SOURCINGBrief History of FDI in Emerging EconomiesAccording to some accounts, the modern era of foreign direct investment from the
24、 developed to developing world began in the late 19th and early 20th centuries (Lewis, 1938, 1948). Wilkins (1977, 1988) described “free standing companies” to characterize a specific form of British outbound investment that did not necessarily grow out of domestic sales. Such firms had components o
25、f direct and portfolio investment: the directors were foreigners in the country of operation, but the firms financing was through bonds. Wilkins (1977) contrasted this form with U.S. outbound FDI, which involved the expansion of domestic activities abroad. These new forms of investment contributed t
26、o a period in the late 1800s and early 1900s in which U.S. and British investors helped finance infrastructure in a number of developing economies, such as railroads in Mexico. As Hoffman (2000) has documented, however, the share of foreign investment to overall GDP in many developing countries fell
27、 precipitously throughout the 20th century due to nationalism, decolonization, more attractive investment opportunities in developed countries, and concerns about expropriation of overseas investments. In Mexico, with the emergence of the “revolutionary” PRI party, the decline in investment was espe
28、cially dramatic. In the 1990s, the process of private, foreign participation in developing country infrastructure accelerated once again (World Bank, 1999). Broad global trends toward more open economic systems, specifically characterized by official policies of economic liberalization and privatiza
29、tion, have facilitated this investment (Doh, 2000; Ramamurti, 2000). MNEs from the developed world have become very active in developing countries, viewing the emerging regions of the world both as new consumer markets and sources of inputs for finished goods produced in home regions, whether as par
30、t of their own investment strategies in a vertically integrated global supply chain, or through independent sub-contracting and sourcing strategies.Globalization, Anti-Globalization, and the Role of MNEs in Developing CountriesNeoclassical economics has maintained that there is a positive relationsh
31、ip between open market economics and growth. Solow (1956) and Swan (1956) provided the most basic version of the neoclassical theory of growth. The neoclassical model emphasizes how growth arises from the accumulation of capital, implying that countries with similar production technologies, resource
32、 endowments, time preference of consumption, and saving and population growth rates, should converge to similar steady state levels of per-capita income (Barro & Sala-i-Martin, 1992). The concept of convergence relies on technology diffusion. The use of knowledge and technologies are major factors a
33、ccounting for the high state of development in the Western industrialized economies. Barriers to the free flow of information and transfer of technologies from the developed economies to the less developed ones have often been cited as one of the most important explanations for the lack of convergen
34、ce in growth performance among economies in the world (Taylor, 2000). Market knowledge and intelligence are also potential contributors to these spillover effects and the convergence in incomes between developed and developing economies.Dependency theory emerged in the late 1960s and early 1970s to
35、counter the presumption that the growth patterns of developing and developed countries would converge, and that barriers to capital and technology flows were the source of the absence of convergence. On the contrary, dependency theorists suggested that the development of the industrialized nations h
36、ad occurred at the cost of the developing nations. Development and underdevelopment represented two sides of the same coin, with development of the industrialized countries a product of the underdevelopment of the Third World. Developing nations were often the victims of global forces (multinational
37、 corporations, world markets, foreign embassies, and military interventions) that the developing countries were powerless to control (Cardoso & Faletto, 1979; Frank, 1967). Lending agencies such as the World Bank and International Monetary Fund were complicit in this process as they pushed private s
38、ector (often foreign) development in developing countries and urged a curtailment of state-led or state-directed development policies.Grounded often in Marxian philosophy, the dependency school tended to employ terms like colonialism and imperialism to describe foreign investment activities in domes
39、tic markets. One extension of this perspective is the Import Substitution Industrialization (ISI) approach to development within less developed economies. Prebisch (1964) proposed that less developed countries should build their own development model through state-initiatives like high tariff barrie
40、rs to protect industries from fierce outside competition. In this way they substitute their own homemade industrial products for expensive imported goods. Even mainstream scholars of international political economy (IPE) such as Moran (1974) acknowledged the mixed role that American corporations ope
41、rating in developing countries have played. In his case study of Kennecott Copper of Chile, Moran (1974) argued that Kennecott exploited political and economic resources to maneuver and manipulate the Chilean political system. The legacy of the dependency model of development for the emerging market
42、s in general is a residual suspicion of the private sector and private investment, especially in strategic and “national” sectors. More recently, the advent of economic globalization has inspired a renewed stream of criticisms of the impact of global capital and investment flows from a wide range of
43、 quarters (Ralph Nader and George Soros, for example) and academic disciplines (political science, sociology, psychology, and economics, for example). These include Friedmans The Lexus and the Olive Tree (1999); Stiglitzs Globalization and its Discontents (2002); Singers One world: The Ethics of Glo
44、balization (2002); Soross George Soros on Globalization (2002); Barber and Schulzs Jihad vs. Mcworld: How Globalism and Tribalism are Reshaping the World (1996); and Dunnings Making Globalization Good: The Moral Challenges of Global Capitalism, among many others. Dunning (2003) argues that modern ca
45、pitalism has failed on at least three basic dimensions: failure of markets, failure of institutions, and failure of moral virtues. Criticisms have been especially sharp in relation to the activities of multinational companies such as Nike, Levis, United Fruit, and others - whose sourcing practices i
46、n developing countries have been alleged to exploit low-wage workers, take advantage of lax environmental and workplace standards, and otherwise contribute to social and economic degradation. Many governments, international organizations, and both local and multinational NGOs have criticized the low
47、-cost labor seeking behavior of MNEs in developing countries, suggesting such firms scan the globe for the cheapest, least regulated, and most exploitive situations in which to source raw materials and semi-finished products (Singer, 2002). Most of these treatments have tended to focus on the costs
48、and benefits of globalization, rather than proposing potential solutions or modification of current models of global trade and investment. One classic international business theory that may be used to better understand the role of MNEs in the global economy and as a potential contributor to poverty
49、alleviation in developing countries, is the international product life-cycle theory as first articulated by Vernon (1966).The International Product Life-CycleIn 1966, Raymond Vernon described a theory of international competition that broke free of the constraints associated with previous neoclassical perspectives on economic growth and development. In what is referred to as a product life cycle model (PLC), Vernon argued that capital intensive and tech
