chapter  1
24 Pages


ByLeonard Waverman, William S. Comanor, Akira Goto

Globalization-the increasing integration of national markets-has undergone various phases, until recently largely fuelled by the explosion of world trade following the implementation of GATT and successive tariff-reducing rounds of multilateral negotiations. As Ostry (1989, 1990) points out, we are now in a phase of globalization dominated not by trade, but by foreign direct investment (FDI) under the aegis of multinational enterprises (MNEs). The multinationals of today are not searching for resource inputs as in the earlier portion of the twentieth century (see Krugman 1990) but are spreading the economies of scale and scope of increasingly technology-driven production across borders and among firms. This increasing globalization of product and capital markets, combined with the accelerating rhythm of technological innovation, has significantly altered the competitive environment of the large corporate enterprise.