This document is from a chapter about globalization and its impact on society. The chapter objectives are to evaluate the economic effects of multinational enterprises on home and host countries, discuss responsible corporate behavior, and examine issues around the social impacts of globalized business. It discusses topics like the impact of foreign direct investment, ethics and bribery, environmental sustainability, labor conditions, and developing corporate codes of ethics.

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Part Two
Comparative Environmental Frameworks
International Business
Environments and Operations,
13/e
Global Edition
5-1

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Chapter Five
Globalization
and Society

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Chapter Objectives
• To identify problems in evaluating the activities
of multinational enterprises (MNEs)
• To evaluate the major economic effects of MNEs
on home and host countries
• To understand the foundations of responsible
corporate behavior in the international sphere
• To discuss some key issues in the social
activities and consequences of globalized
business
• To examine corporate responses to globalization

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Evaluating the Impact of FDI
• FDI is Foreign Direct Investment
• The large size of some MNEs causes
concern for some countries
• MNEs and countries need to understand
the impact of FDI in home and host
countries

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What MNEs Have To Offer

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Considering the Logic of FDI
• Need to consider relationship between
those who make foreign investments
(MNEs) and possible effects on receiving
countries
• Areas to consider:
 Stakeholder trade-offs
 Cause-and-effect relationships
 Individual and aggregate effects

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The Economic Impact of the MNE
• Balance-of-Payments effects:
 Net import effect
 Net capital flow
• Growth and Employment effects:
 Home-country losses
 Host-country gains
 Host-country losses

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Why Companies Care About Ethical
Behavior
• Instrumental in achieving two objectives:
 To develop competitive advantage
 To avoid being perceived as irresponsible

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The Cultural Foundations of Ethical
Behavior
• Relativism vs. Normativism: do truths
depend on the values of the groups or are
there universal standards
• Negotiating between evils

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The Legal Foundations of Ethical
Behavior
• Legal justification for ethical behavior may
not be sufficient because not everything
that is unethical is illegal.
• The law is a good basis because it
embodies local cultural values.
• As countries tackle similar ethical issues,
laws will become more similar.

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Ethics and Bribery
• Bribes are payments or promises to pay cash or
anything of value
• Bribes are used to get government contracts or
to get officials to do what they should be doing
anyway
• Problems with bribery:
 Affects performance of company & country
 Erodes government authority
 Damages reputations when disclosed
 Increases cost of doing business

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Where Bribes Are (and Are Not)
Business as Usual

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What’s Being Done About
Corruption?
• Cross-National Accords: The OECD, the
ICC, and the UN
• The U.S. Foreign Corrupt Properties Act
• Industry Initiatives
• Relativism, the Rule of Law, and
Responsibility

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Ethics and the Environment
• Sustainability
• Global Warming and The Kyoto Protocol
 National and Regional Initiatives
 Company-Specific Initiatives

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Future: How to See the Trees in
the Rain Forest
• The Amazon rain forest accounts for 1/3
of the world’s remaining tropical forest
• Kyoto Protocol proposes reforestation to
reduce greenhouse emissions
• Major Challenge: protect global
environment while preserving Brazil’s
sovereignty over resources

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Ethical Dilemmas and the
Pharmaceutical Industry
• Tiered pricing and other price-related
issues
• WTO Agreement on Trade-Related
Aspects of Intellectual Property Rights
(TRIPS)
• R&D and the Bottom Line

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Ethical Dimensions of Labor
Conditions
• Ethical Trading Initiative
• The Problem of Child Labor
• What MNEs Can and Can’t Do

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Sources of Worker-Related Pressures in
the Global Supply Chain

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Corporate Codes of Ethics
• Motivations for Corporate Responsibility
• Developing a Good Code of Conduct

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