Foreign Direct Investment and Global Corporate Social Leadership

Pratono, Aluisius Hery and ., Suyanto (2011) Foreign Direct Investment and Global Corporate Social Leadership. Project Report. Universitas Surabaya, Surabaya. (Unpublished)


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The contribution of Foreign Direct Investment (FDI) on host countries welfare has long been a subject of debate. This present study investigates the contribution of FDI from four important issues. The first issue is the contribution on economic growth, the effect on pollution, and the impact on social security of host countries. The macroeconomic perspective is examined in this first issue, in order to probe into the FDI-Growth hypothesis. The pollution issue is relevant to the hypothesis of Pollution Haven, and the social security issue is highlighted to evaluate the life quality of labours. The second important issue relates to Corporate Social Responsibility (CSR). The presence of Multinational Companies (MNCs) in host countries is argued positively associated with CSR management. MNCs tend to provide high-quality standard of CSR to society. This second issue serves as a complement to the first issue, by collecting the puzzle of related literature. The third issue is on stakeholder partnership. The green technology becomes the center of analysis, by implementing the pareto efficiency model on environmental issue. The fourth issue focuses on FDI and community development. A case study of game interaction between Kaltim Prima Coal (KPC) and the Dayak Basab community is surveyed, to provide qualitative analysis on the issue. Chapter 1 of this study discusses the subject matter, by presenting the background, the research objectives, empirical approach, and theoretical foundation. Chapter 2 examines the FDI-Growth Hypothesis under Turckan’s model, investigates the pollution haven hypothesis using Akbostanci’s model, and estimates social security model to test the preposition of “unfair competitive advantage” of Sharna. Chapter 3 evaluates the relationship between FDI and CSR initiatives. By surveying related literature, the FDI initiation to conducting CSR is discussed for probe in sight into the CSR issue. Chapter 4 analyzes stakeholder partnership for FDI, focusing on environmental issue. In this chapter, 93 MNCs are investigated and four “go green” models are developed to test the partnership issue. The analysis in this chapter is performed on firm-level, which complement the country-level analysis in Chapter 2. The final chapter is a case study analysis, conducting under qualitative frameworks of game strategy. The empirical results of the macroeconomic analysis in Chapter 2 show that FDI fosters growth and prompts environment quality. However, it is found that there is no significant effect of FDI on social security policy in host countries. These findings indicate that FDI provides positive advantages to host countries in the forms of an increase in GDP growth and a rise in environmental quality, but it has no significant effect on social security policies of host countries. The literature surveys in Chapter 3 find that there is a positive relationship between FDI and CSR initiatives. Focusing on developing countries in Asia, Europe, the US, and Africa, this chapter argues that FDI has positive association with CSR management structure. This finding is in line with results in Chapter 2, although the focus of analysis in this chapter under different paradigm. The firm-level study on MNCs in Chapter 4 provides empirical evidence that the environmental friendly policy highly positive correlated with green rank of the companies. Companies that promote “go green” policies have higher green rank and green scores. The findings imply that MNCs tend to improve their concerns on environmental-friendly policies in order to increase their green ranks or green scores. The case study analysis in Chapter 5 serves as a complement for the empirical analyses in Chapter 2 and Chapter 4. While Chapters 2 and 4 provide quantitative justification for the benefit of FDI, Chapter 5 offers qualitative validation on whether the MNC under study provides benefit, in the form of development program, on the local community. The findings in this chapter justifies the theoretical argument of Neumann- Morgenstern on that the equilibrium solution of a zero-sum game. The game strategies between Kaltim Prima Coal (KPC) as an MNC and the Dayak Basab as a local community resulted in a win for KPC, but a lost for Dayak Basab. According to the dynamic sequence of the players, where the KPC acts as a leader and Dayak Basab acts as a follower, to solution refers to the Trust Game of David Kreps. Hence, the case study provides results supporting a win-lost solution. The findings from Chapter 2 to Chapter 5 re-assure the argument that evident from macro-level analysis (either countries-level or firm-level) might be different with findings from micro-level analysis (case study). The macro-level analyses have an advantage on the availability of data, as the subject of observation could be many countries or many firms. The case-study analysis has an advantage of providing specific case to answers the question of “how”. Hence, complementing empirical analysis with case study provides a comprehensive analysis on the benefits of FDI on host countries.

Item Type: Monograph (Project Report)
Subjects: H Social Sciences > HB Economic Theory
Divisions: Faculty of Business and Economic > Department of Economic
Depositing User: Suyanto 3198
Date Deposited: 26 May 2016 02:35
Last Modified: 26 May 2016 02:35

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