Scepticism Towards Globalization, Technological Knowledge Flows And The Emergence Of A New Global System

Research Summary

This paper examines the potential effect of anti‐globalization on a key attribute of multinational enterprises (MNEs) – the ability to transfer efficiently complex firm specific technological knowledge internationally. Anti‐globalization policies can supress the transfer of complex technological knowledge by limiting the international transfer of intellectual property, restricting the free movement of scientists and engineers or by dis‐harmonizing regulations across nations. Such suppression is shown to significantly change the global system in terms of the location of value adding activities, their organizational firm boundaries and the origin of MNEs. The model predicts that after a “shock” of anti‐globalization policies, which significantly increases international technological knowledge flow costs, a smaller number of firm‐ and MNE‐ location and control configurations emerges, and domestic firms become more dominant.

Managerial Summary

Anti‐globalization policies threaten a key feature of multinational enterprises (MNEs) – the ability to transfer efficiently complex technological knowledge across political borders. They do so through limitations on the international transfer of intellectual property, restrictions on the free movement of scientists and engineers as well as through dis‐harmonization of regulations across nations. We present a model that shows that such limitations are likely to change the global system making it much more similar to the one that existed pre‐ WW1 and WW2. The emerging global system is predicted to include a large proportion of domestic firms engaging in international trade and MNEs that locate only a small number of value chain activities abroad.