Template-type: ReDIF-Paper 1.0
Author-Name: Amsden, Alice
Author-Email: amsden@mit.edu
Author-Workplace-Name: Department of Urban Studies and Planning, MIT
Title: Firm Ownership, FOEs, and POEs
Abstract: Where the theory of free competition reigns, developing countries should 
	 open their arms to investments from all types of enterprises in order to 
	 maximize jobs. Ownership, measured by votes of shareholders or boards of 
	 directors, is immaterial to performance. Matters change drastically, 
	 though, when competition depends on monopolistic assets and market 
	 theory no longer rigorously holds. Then, ownership matters. Foreign 
	 owned enterprises from developed countries can 'crowd out' privately 
	 owned enterprises from developing countries. They can break their back 
	 before they have a chance to acquire their own assets. FOEs in direct 
	 competition with POEs are not necessary for economic development to 
	 flourish, and it is dangerous for a promising POE to confront a 
	 privileged FOE in its own back yard, often with the backing of the 
	 FOE's powerful government. In this paper it is argued that because 
	 assets differ systematically between FOEs and POEs in their respective 
	 stages of evolution, FOEs may not contribute more to economic 
	 development in monopolistic industries than POEs. Indeed, the best POEs 
	 in the fastest growing emerging economies (e.g. Korea's Samsung, India's 
	 Tata, and Brazil's Embraer) tend to be more entrepreneurial than FOEs. 
	 The paper discusses the contribution of POEs vis-a-vis FOEs to economic 
	 development in emerging economies.
Classification-JEL: L22, L52, L26
Keywords: entrepreneurship, foreign investment, firm ownership, industrialization  
Series: UNU-MERIT Working Papers
Creation-Date: 2009
Number: 048
File-URL: http://www.merit.unu.edu/publications/wppdf/2009/wp2009-048.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2009048