Multinational production and the role of the government. With special reference to the German Centre in Singapore.

Abstract

The aim of this master thesis was the provision of a theoretical foundation for a German Centre. The crucial question was how to approach a subject of such recent nature. The theory of the multinational enterprise with special emphasis on the role of the govern-ment opened up a possible solution. This unquestionably broad subject called for some restrictions. Hence, I restricted the MNE-activities to initial market-seeking FDI while simultaneously confining myself to the host country and its government. The first starting point to approach a GC was the theory of the firm. It was decisive for the subsequent discussion of MNEs to know why firms exist at all. After having identified some reasons for the existence of firms (e.g. market failure), the next step took us to the question what facilitated the enormous rise of MNEs. It was shown that the process of globalization provided the breeding ground for the tremendous spread of MNEs. However, the MNE is not only a child of globalization (it has been around much longer) but also one of the midwifes together with technological developments and (in-ter) national de-regulations. The motives for FDI revealed that market- and asset-seeking are the most important. Nevertheless, the question why MNEs exist needed yet to be an-swered. From the vast number of theoretical approaches, Dunning's 'Eclectic Paradigm' provided an interdisciplinary explanation. As a conclusion, MNEs arise through a com-bination of firm-specific assets with country-specific advantages if the firm is willing and capable to internalize these advantages. The path to multinationality of manufacturing companies demonstrated the inherent problems arising from local agents and licensing.