Foreign Direct Investments, Corporate Social Responsibility, and Economic Development

The increase in FDIs to developing countries has also been accompanied with rising societal expectations from the MNCs and TNCs to demonstrate more commitments to CSR. Owing to the natural resources curse, there is increasing expectations by governments, investors, consumers and local communities that businesses, particularly the MNCs and TNCs, should go beyond local regulatory compliance to earn their ‘license to operate' by demonstrating that their operations provide a beneficial impact by helping to remedy the societal problems. Although it is doubtful whether businesses will take up such responsibilities, some companies have started to engage in sustainable CSR in area of operations. Therefore, the paper recommends that conscious and sustainable CSR practices of these MNCs/TNCs must be accomplished with corporate accountability in order to have the greatest positive impact on people, environment and foster economic development.

Promoting Foreign Direct Investment

If audits serve as formidable internal monitoring tools which facilitate corporate governance, and Corporate Social Responsibility has been proven to serve as “an extension of corporate governance”, as well as a signaling device, are both tools not instrumental in promoting Foreign Direct Investment? Through an analysis and evaluation of the literature relating to audits and Corporate Social Responsibility, this chapter aims to investigate the above claim and question on how Corporate Social Responsibility, as “an extension of corporate governance”, as well as a signaling mechanism, could facilitate and promote Foreign Direct Investment.

Corporate Social Responsibility and Financial Development

This chapter not only attempts to identify those variables which govern and impact the relationship and interplay between Corporate Social Responsibility and Foreign Direct Investment, but illustrate the conditions under which such variables are likely to be most susceptible to change and fluctuations – as well as consequences that are likely to be generated as a result of such fluctuations. In so doing it also contributes to the literature in highlighting why greater focus and priority should be accorded to Foreign Direct Investment and Corporate Social Responsibility, as tools for poverty alleviation. Further, as well as accentuating, under the conclusion section, why the UK Government strategy for building more plants after Hinkley Point, implies that the UK would not reap all benefits of the Project, the chapter expansiates on contributory factors which have resulted in the decision of the UK Government to delay its decision on the Hinkley Point Project. Contributory factors, which include among a notable few, the need for flexible generating capacity was also cited, since renewable energy cannot be easily converted at Hinkley Point.

IFRS Harmonization and Foreign Direct Investment

IFRS refers to International Financial Reporting Standards, which are the guidelines that provide the framework for accounting works. The principles are also known as the International Accounting Standards (IAS). This global financial concept was first introduced in 2001 to equip investors with analyzed accounting statements. In this Chapter we review the relation between IFRS and Foreign Direct Investments (FDIs). We review the relevant literature that analyses the effects on IFRS on FDIs and cross-border acquisitions. The economic literature states that the introduction of IFRS has presented an important increase in FDIs. The evidence shows that IFRS adopting countries attract investments from countries that implemented IFRS and non-IFRS implementing countries.

Corporate Social Responsibility

There is a famous saying “With Great Power Comes Great Responsibility” and speaking of this in terms of a country's financial position Foreign Direct Investment (FDI) can be considered as a power and CSR as a share of responsibility. Generally the unfurling of CSR is a riveted and intrigued corner of developing country like India. Every business entity is willing to take up more responsibility as it is given lot of respect from various international agencies in the form of FDI and most of the organizations are realizing that more business heights will imply sustained development for social progress. Social innovation is the output derived when FDI and CSR come together leading to development of a nation in various facets. The purpose of the study is to articulate the impact of FDI on CSR activities in Indian context and to analyze the importance of how both FDI and CSR are interdependent and complement each other in various facets, not forgetting the fact that it's high time for Indian economy to boost up its CSR activities keeping in view the subsequent flow of investments.

Foreign Direct Investment as a Tool for Poverty Alleviation

It has been argued that “Absolute poverty can be alleviated if at least two conditions are met. First, economic growth must occur—or mean income must rise—on a sustained basis. Second, economic growth must be neutral with respect to income distribution or reduce income inequality.” By way of reference to current and previous literature on economic development, this chapter aims to investigate the relationship between poverty, economic growth, and income distribution, as a means of mitigating gaps in the literature on the topic, as well as contributing to the literature of Foreign Direct Investment as a tool for poverty alleviation.

Recommendations

As well as contributing to a deeper insight of why focus of Corporate Social Responsibility varies between developed and developing countries, this chapter is aimed at contributing to knowledge and providing a better understanding of institutional and corporate structures operating in developed and developing countries. Such institutional and corporate structures constituting some of the factors which may impact a firm's responsibilities to much wider stakeholders, and particularly its commitment to ensuring that its activities do not adversely impact the ecosystem in which it operates. By incorporating the role of corporate governance, importance and significance of innovation and entrepreneurship, the chapter not only aims to recommend means whereby Corporate Social Responsibility can serve as a more effective tool for promoting worthy causes, and ensuring that obligations to the ecosystem and wider stakeholders are facilitated, but also highlight why a redress in the focus of Corporate Social Responsibility, as regards developing countries particularly, needs to be re-evaluated.

Parliamentary Sovereignty, the Rule of Law, and the Separation of Powers

This chapter is aimed at highlighting how common law has evolved over the centuries, namely through the flexibility accorded to judicial precedents, as well as through the evolutionary nature evidenced in the processes and rules applied in statutory interpretation. In addition to illustrating how informational asymmetries can be mitigated through de centralization, facilitated with courts employing the use of non-legal agents such as expert witnesses - as evidenced in the Daubert case, Pepper v Hart also illustrates how common law has evolved through the scope and permissibility of aids to statutory interpretation. Whilst financial markets and changes in the environment impact legislators, and whilst it is widely accepted that legislation constitutes the supreme form of law, the necessity for judges to introduce a certain level of flexibility will also contribute towards ensuring that legitimate expectations of involved parties are achieved - particularly where the construction of the words within a statute gives rise to considerable ambiguity. By way of reference to landmark rulings in the United States, cases such as Daubert and The Estate of Edgar A. Berg v. Commissioner, this paper also aims to illustrate the vital role increasingly assumed by non-legal actors, and why this approach should constitute a trend to be adopted in European common and civil law jurisdictions. This being the case given the failures and flaws of references to Parliamentary material and whether these should be permitted as an aid to the construction of legislation which is ambiguous or obscure, as illustrated in the case of Pepper v Hart.

Enhancing Regulatory, Financial, Fiscal Investment Incentives as a Means of Promoting Foreign Direct Investment

According to UNCTAD, regulatory incentives, which include “lowering of environmental, health, safety or labor standards; temporary or permanent exemption from compliance with applicable standards; stabilization clauses guaranteeing that existing regulations will not be amended to the detriment of investors”, in addition to financial incentives, are considered “less important policy tools for attracting and benefiting from Foreign Direct Investment.” Whilst survey results, also illustrate that fiscal incentives are the most important type for attracting and benefiting from foreign investment, it is also highlighted that certain scenarios exist whereby investment incentives could be regarded as “compensation for information asymmetries between the investor and the host government, as well as for deficiencies in the investment climate, such as weak infrastructure, underdeveloped human resources.” This chapter not only explores how environmental incentives can serve as means of attracting investment, but also contributes to the literature on how their effectiveness could be enhanced.

Foreign Direct Investment in China

In accounting for the gaps in the literature between the period 2011 and 2016, more recent literature – particularly empirical related studies on the topic have been consulted to consolidate on the paper “Foreign Direct Investment in China: Its Sectoral and Aggregate Impact on Economic Growth”. As highlighted by Wei (2013), it is important to recognize and acknowledge that the relationship between FDI and employment is affected by many variables, such as growth of the national population, increased exports, and growth of the domestic economy. Furthermore, as illustrated by Iamsiraroj and Doucouliagos (2015), whilst positive and negative effects may be demonstrated in relation to economic growth, in some countries, no effects can be deduced as regards the relationship between economic growth and FDI in certain other countries. This chapter also aims to accentuate the need for greater focus on environmental issues - as well as poverty alleviation - than is currently the case within the sphere and framework of Carroll's pyramid of Corporate Social Responsibility.