The Subjects of International The Subjects of International Economic LawEconomic LawBy By MaranMaranDefinition and TypesDefinition and Types The subjects of international economic law mean the legal persons that can enjoy the rights and implement the obligations in the international economic relationship. There are many different types of subjects of international economic law. And the most distinctive are transitional corporations or called multinational corporations and international economic organizations. Transitional CorporationsTransitional Corporations What do you think a What do you think a MNC(MNC(Sometimes referred to as Sometimes referred to as “ “multinationalmultinational corporations corporations” ”) is?) is? Why firms become multinational?Why firms become multinational?What do you think a MNC is?What do you think a MNC is? A corporation that has its facilities and other A corporation that has its facilities and other assets assets in at least one country other than its in at least one country other than its home country.home country. In 1969 a famous economist Howard In 1969 a famous economist Howard PerlmutterPerlmutter wrote: “multinational corporation wrote: “multinational corporation is a new kind of institution - a new type of is a new kind of institution - a new type of industrial social industrial social achitectureachitecture particularly particularly suitable for the latter third of the twentieth suitable for the latter third of the twentieth century.” And “This type of institution could century.” And “This type of institution could make a valuable contribution to world order make a valuable contribution to world order and conceivably and conceivably excerciseexcercise a constructive impact a constructive impact on the nation-state”on the nation-state”Why firms become Why firms become multinational?multinational?The OLI Paradigm O = Ownership L = Location I = Internalization OwnershipOwnership The firm that invests abroad has a The firm that invests abroad has a competitive advantage (to exploit) and out-competitive advantage (to exploit) and out- compete the firms that operate in the compete the firms that operate in the country where the investment is donecountry where the investment is done. . Economies of scale connected to large-Economies of scale connected to large- sized companysized company Possess technologies that give an Possess technologies that give an advantage on the subsidiary abroad advantage on the subsidiary abroad Monopolistic advantages in terms of Monopolistic advantages in terms of privilprivile eged access to inputs or outputs ged access to inputs or outputs marketsmarkets Skills of managementSkills of managementLocationLocation Advantages of the foreign location: Advantages of the foreign location: Different nations have different factor Different nations have different factor endowments:endowments: Natural resources:Natural resources: Cheap labour forceCheap labour force Skills and capabilitiesSkills and capabilities Country characteristics (political stability, Country characteristics (political stability, regulations, cultural distance)regulations, cultural distance)Internalization Internalization Internalization occurs when a firm expands Internalization occurs when a firm expands its operations in another country, by its operations in another country, by acquiring the property of the assets that are acquiring the property of the assets that are abroadabroad. . Ownership of foreign assets more Ownership of foreign assets more convenient than the marketconvenient than the market Why?Why? Information asymmetries (transaction Information asymmetries (transaction costs can be too high) - Market failurescosts can be too high) - Market failures Keeping skills and capabilities internal to Keeping skills and capabilities internal to the firmthe firmMain strategies of transitional Main strategies of transitional corporationscorporations Natural-resource seekingNatural-resource seeking Efficiency seekingEfficiency seeking Market seekingMarket seeking Capability seeking Capability seeking Copyright Cengage Learning. All rights reserved.3 | 10International Economic International Economic OrganizationsOrganizations Economic communityEconomic community An organization of nations formed to An organization of nations formed to promote the free movement of resources and promote the free movement of resources and products among its members and to create products among its members and to create common economic policiescommon economic policies Usually Working to Foster TradeUsually Working to Foster TradeIMFIMFThe International Monetary Fund (IMF) is an The International Monetary Fund (IMF) is an organization of 187 countries, working to foster organization of 187 countries, working to foster global monetary cooperation, secure fi