Bullish on Democracy: Research Notes on Multinationals and the Third Wave

By Pei, Minxin; Lyon, Merritt | The National Interest, Winter 2002 | Go to article overview

Bullish on Democracy: Research Notes on Multinationals and the Third Wave


Pei, Minxin, Lyon, Merritt, The National Interest


ONE OF THE most contentious issues in globalization is the international social responsibility of investors--mainly multinational corporations (MNCs)--in industrialized democracies. To be sure, the debate over how (and if) these investors can simultaneously pursue profits and global public goods has a long and contentious history, as anyone who remembers the publication of Richard Barnett and Ronald Muller's Global Reach in 1974 knows. However, as the pace of globalization accelerates (yes, it is, by the way, despite 9/11), and the backlash against globalization gains political momentum, the ethical role of international private investors has again become a divisive controversy. That controversy, which generally pits the business community against an array of international non-governmental organizations, is fueled most often by specific incidents: high-profile investment projects in countries with poor human rights record, revelations of child labor and sweatshop abuses, and allegations of environmental damag es attributed to foreign corporations. Public outrage, abetted by a media generally inclined against business, is often followed by calls for consumer boycotts or other political sanctions against the offending firms.

Over time, the accumulation of such incidents has encouraged a widespread perception that multinational corporations are irresponsible global citizens who care only about fattening their own bottom lines. Conventional wisdom even among the more knowledgeable public (and some academics) holds that MNCs, guided by profit-maximizing strategies, flock to authoritarian regimes capable of repressing demands for economic justice and the costs of meeting environmental standards. (1)

But despite the prevalence of such views, there is almost no empirical evidence that any of this is true. Indeed, a growing body of research suggests instead that foreign direct investment (FDI) (2) is generally beneficial to developing countries, creating the socioeconomic conditions conducive to the improvement of human rights and environmental quality in host countries. (3) Several studies indicate that MNCs, particularly those based in open societies, find that it makes better business sense (and enhances profitability) to "export human rights" and to implement stricter environmental regulations in the developing world. An empirical study of the relationship between foreign direct investment and human rights has produced evidence that FDI is associated with more political rights and civil liberties in developing countries. (4)

Similarly, a growing body of research shows that MNCs are not engaged in an environmental race to the bottom. Instead, scholars have found a strong connection between corporations' environmental performance and superior financial performance, and that global environmental standards and strict compliance may increase the market value of compliant firms in developing countries. (5) Others have found a link between environmental management and stock performance through both tangible economic influences and what has been termed the "reputation effect." (6) Still, other studies have found a strong correlation between environmental performance and profitability at the firm level. (7) In other words, MNCs may actually be more environmentally responsible than local competitors. (8)

CAN THE same be said for democratization? Are MNCs good for the political quality-of-life of the countries in which they invest? Our evidence, based on examining FDI patterns following democratic regime transitions in 23 countries since the mid-1970s, indicates that FDI investors--mainly MNCs--have been far more socially responsible, even virtuous, than many have supposed. (9) FDI investors have quickly embraced new democracies immediately following a regime transition; overall, the evidence shows a significant increase in FDI within the three years of regime transition compared with the three-year period prior to transition. …

The rest of this article is only available to active members of Questia

Sign up now for a free, 1-day trial and receive full access to:

  • Questia's entire collection
  • Automatic bibliography creation
  • More helpful research tools like notes, citations, and highlights
  • Ad-free environment

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items

Items saved from this article

This article has been saved
Highlights (0)
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

Citations (0)
Some of your citations are legacy items.

Any citation created before July 30, 2012 will labeled as a “Cited page.” New citations will be saved as cited passages, pages or articles.

We also added the ability to view new citations from your projects or the book or article where you created them.

Notes (0)
Bookmarks (0)

You have no saved items from this article

Project items include:
  • Saved book/article
  • Highlights
  • Quotes/citations
  • Notes
  • Bookmarks
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited article

Bullish on Democracy: Research Notes on Multinationals and the Third Wave
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Full screen

matching results for page

Cited passage

Style
Citations are available only to our active members.
Sign up now to cite pages or passages in MLA, APA and Chicago citation styles.

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

"Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Cited passage

Welcome to the new Questia Reader

The Questia Reader has been updated to provide you with an even better online reading experience.  It is now 100% Responsive, which means you can read our books and articles on any sized device you wish.  All of your favorite tools like notes, highlights, and citations are still here, but the way you select text has been updated to be easier to use, especially on touchscreen devices.  Here's how:

1. Click or tap the first word you want to select.
2. Click or tap the last word you want to select.

OK, got it!

Thanks for trying Questia!

Please continue trying out our research tools, but please note, full functionality is available only to our active members.

Your work will be lost once you leave this Web page.

For full access in an ad-free environment, sign up now for a FREE, 1-day trial.

Already a member? Log in now.