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posted 11/01/06

The Rise of Transnational Corporations from Emerging Markets: Threat or Opportunity

Jeffrey D. Sachs (left) makes his keynote address at the opening conference session of The Rise of Transnational Corporations from Emerging Markets: Threat
or Opportunity.

Pictured center is Luiz Carlos "Lical" Carvalho, Vice President for In-Company Programmes, Fundação Dom Cabral. Pictured at right is Karl P. Savaunt, Executive Director of the Columbia Program on International Investment.

For anyone who has watched business acquisitions such as the one that saw Chinese computer maker Lenovo reshape the marketplace when it purchased IBM's personal computer division, it comes as no surprise that firms outside the U.S., particularly those from emerging markets, bear notice. But for many people, consumers and policy makers alike, the full impact of globalization is not yet evident — even though it already stands to completely reconfigure international economics and make the world a very different place in the process.

For that reason, the members of the Columbia Program on International Investment (CPII) a joint undertaking of The Earth Institute at Columbia University and Columbia’s Law School; Fundação Dom Cabral, Brazil; and the Special Unit for South-South Cooperation in the United Nations Development Programme (UNDP) organized an international conference at Columbia to explore the many fundamental ways that foreign direct investment (FDI) effect their home countries as well as the countries in which they invest.

"We are living in the age of convergence of economic performance after several centuries of divergence," said Earth Institute director Jeffrey D. Sachs in his keynote address. "Assuming there is no catastrophe, we're living in an age that will be marked by the biggest economic change in the history of recent centuries. It will have, in its geopolitical impact, a comparable role to the Industrial Revolution."

FDI flows have risen significantly over the past 30 years, from roughly $40 billion in the early 1980s to a peak of $1.4 trillion in 2000 and $900 billion last year. Much of this investment has traditionally come from transnational corporations (TNCs) headquartered in developed countries. However, recent years have seen the rise of TNCs from emerging markets led by firms from China, India, Korea and many others.

Speakers and participants addressed a wide range of issues that arise for companies as well as home and host governments as emerging markets increasingly integrate with the world economy through outward FDI by domestic firms. Among the questions they addressed included:

• Why do firms from emerging markets invest (or have to invest) abroad and what issues do they face when doing so?
• What are their transnational growth patterns and how has this growth differed from that of firms from developed countries some 30 years ago?
• How are emerging markets handling corporate governance and corporate social responsibility?
• How do the emerging home countries benefit from outward FDI and which policies should they pursue in terms of liberalizing their outward FDI policies in a manner that is beneficial to them and supports the international competitiveness of their firms?
• How will host countries reconcile the possibilities of tapping emerging market FDI with protectionist concerns?
• What are the implications for international rule-making?

For many, concerns over globalization center on what will happen to individuals and communities in home and host countries as capital moves more freely and more frequently around the world. As a result, one of the prevailing themes behind many comments was how to ensure that the societal impacts of globalization are minimized in order to ensure that the economic benefits are felt by all.

"Ultimately, the corporate sector will not grow if society does not grow," said Yiping Zhou, director of the Special Unit for South-South Cooperation at the UNDP.

Papers from the conference are expected to be published next year.

About The Earth Institute
The Earth Institute at Columbia University is the world's leading academic center for the integrated study of Earth, its environment and society. The Earth Institute builds upon excellence in the core disciplines — earth sciences, biological sciences, engineering sciences, social sciences and health sciences — and stresses cross-disciplinary approaches to complex problems. Through research, training and global partnerships, it mobilizes science and technology to advance sustainable development, while placing special emphasis on the needs of the world's poor. For more information, visit www.earth.columbia.edu.