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Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
Business Week 2011 - Filippaios
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Business Week 2011 - Filippaios


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Business Week 2011 - 10 May

Business Week 2011 - 10 May

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  • 1. Foreign Direct Investment, Political and Civil Liberties: The role of Business Education in shaping the current paradigm Dr Fragkiskos Filippaios Kent Business School University of Kent Business Week 2011
  • 2. Outline
    • Current Paradigm
      • Role of Foreign Direct Investment
      • Some Cases
      • An empirical explanation
    • The role of business education
      • Current situation
      • Changing the paradigm
    • Final thoughts
  • 3. Motives for Foreign Direct Investment
    • Motives for FDI in Developing countries different from OECD countries
      • Structure of economy and Institutions in Developing countries
      • Wide interest on the Political Environment
        • Rodrik (1996), Harms and Ursprung (2002), Busse (2004)
    • Does Democracy stimulate or impede FDI?
  • 4. Is this a trivial question?
    • Same question for many other economic outcomes (growth, government spending etc.) (Barro, 1997)
      • Overall results inconclusive
    • For FDI the issue seems to be resolved:
      • FDI is not attracted “by societies in which political rights are repressed and workers’ representation is curtailed” (Harms and Ursprung, 2002, Rodrik, 1996, Busse, 2004)
  • 5. Some Interesting Cases
    • Nike
    • June 1996 – LIFE Magazine case
    • Child Labour in Pakistan
    • $10 -12 million a year spent on Corporate Social Responsibility
  • 6. Coca Cola
    • The US-based International Labour Rights Fund, and the US United Steelworkers filed a lawsuit against Coca-Cola accusing its franchised bottle plant in Colombia of using paramilitaries to suppress union activity
    • The lawsuit filed in Miami in 2001 alleged that the company "maintains open relations with murderous death squads as part of a program to intimidate trade union leaders."
    • Coca-Cola said it could not be held responsible because the plants were not directly under its control
  • 7. McDonalds
    • In the 1990s McLibel case, McDonalds were found to "exploit children", be "culpably responsible for animal cruelty", and have "advertisements, promotions and booklets which have pretended to a positive nutritional benefit which their food did not match"
    • Its record of labour, working conditions, unionism and pay was criticised.
  • 8. Democracy
    • Democracy consists of:
    • Political Liberties
    • Civil liberties
    • Electoral Control
    • Organisation and Economic rights
  • 9. The two dimensions
    • Political Liberties
    • “ Rights to participate meaningfully in the political process . In a democracy this means the right of all adults to vote and compete for public office, and for elected representatives to have a decisive vote on public policies.”
    • Civil Liberties
    • “ Civil Liberties are rights to free expression, to organize or demonstrate , as well as rights to degree of autonomy such as provided by freedom of religion, educations, travel, and other personal rights.”
    Gastil Index of Civil and Political Liberties (Gastil, 1982)
  • 10. How liberties influence FDI?
    • Higher civil and political liberties imply better democratic institutions
    • No reason to expect that these two liberties affect the investment motives alike
    • Civil liberties refer to the workplace environment and the organization rights of the workers and to various economic rights
    • Political liberties refer to the decision-making process in the country and the way the government chooses which policies to implement
  • 11. Effect of Political Liberties
    • Political liberties’ repression effect to FDI comes through the economic policy channel.
    • Elections act as a disciplining device for the policymaker. When elections are free and fair, voters will punish the officeholders that deliver “bad” economic outcomes (Ferejohn, 1986; Drazen, 2000).
    • Non-democratic autocratic rulers have a shorter time horizon since policy changes, e.g. due to a violent revolution, are more frequent in non- democracies (Olson, 1993, McGuire and Olson, 1996)
  • 12. Effect of Civil Liberties
    • High repression of civil liberties is expected to exert a negative effect on the productivity of the workforce
    • An increase in economic rights and civil liberties may stimulate the working of the free market, providing better outcomes for productivity and growth (Friedman, 1962).
    • Adverse powers may come into play. Labour unions and special interest groups begin to form and gain power increasing their ability to extract rents from the multinationals.
  • 13. What does the data imply?
    • US Foreign Direct Investment abroad
    • 105 countries (mostly developing)
    • 20 years (late 1980s till mid 2000s)
    • There is a point of civil liberties where multinationals would be happy to have a slight suppression of those in order to extract higher profits
  • 14. So what needs to be done?
    • The data reflects reality and contradicts what the academic literature has claimed up to this point
    • Business education should respond to reality and not stagnate in ideas of the past
    • What is the current situation?
  • 15. Current Situation
    • In a recent Wall Street Journal article, Psychology professor Steven Davis argued that cheating by high school students has increased from about 20 percent in the 1940’s to 75 percent today.
    • “ Students say cheating in high school is for grades, cheating in college is for a career.”
  • 16. How does education respond?
    • Many institutions of higher education have instituted policies regarding ethics education
    • Faculty Handbook of the Mays Business School at Texas A&M University includes the following statement:
    • “ Therefore, faculty and staff have a responsibility for creating an academic environment that promotes honest academic inquiry and teaches students ethical behavior in the process.”
  • 17. This is not enough...
    • Teach courses such as Business & Society, Business Ethics, Social & Regulatory Issues
    • Integrate business ethics into core curriculum
    • Learning about Business Ethics and Corporate Social responsibility does not change attitudes
  • 18. We are responsible...
    • Faculty members need education & support to achieve the above objectives
    • We should assume responsibility for educating our students about corporate responsibility, business ethics & social responsibility
    • Lead by example not words…
  • 19. Thank you
  • 20. References
    • Adam, A. and Filippaios, F. 2007 Foreign direct investment and civil liberties: a new perspective, European Journal of Political Economy, 23(4), 1038-1052
    • Busse, M., 2004. Transnational corporations and repression of political rights and civil liberties: an empirical analysis. Kyklos 57, 45-66.
    • Barro, R.J., 1997. Determinants of Economic Growth: A Cross-Country Empirical Study. MIT Press, Cambridge, MA.
    • Freedom House, 2002. Freedom in the world. Freedom House, New York.
    • Friedman, M., 1962. Capitalism as freedom. University of Chicago Press, Chicago.
    • Gastil, D. R., 1982. Freedom in the world. Greenwood Press, Westport CT.
    • Harms, P., Ursprung, H.W., 2002. Do civil and political repression really boost foreign direct investments? Economic Inquiry 40, 651-663.
    • Rodrik, D., 1996. Labour standards in international trade: Do they matter and what do we do about them?, in: Lawrence, R., Rodrik, D., Whalley, J., (Eds), Emerging agenda for global trade: High stakes for developing countries, Overseas Development Council, Washington, DC, pp. 35-79.
    • Spar, D., 1999. Foreign Investment and Human Rights. Challenge 42, 55-80.
    • United Nations Conference on Trade and Development (UNCTAD), 2003. World Investment Report 2003: FDI Policies for Development: National and International Perspectives, United Nations, Geneva and New York.