INTRODUCTION: PROBLEM STATEMENT

Multinational companies have been largely responsible for uplifting for all spheres of business life across the globe. They are the world leaders in high technology advancement and automation, which resulted in more efficient commerce worldwide. They are the leaders in the field of manufacturing, banking, travelling, tourism, distribution, transportation and so on. Multinationals are the forerunners in satelite communication development, space tecnology and electronic information network services. They are actively engaged in logistic services, food and agriculture industry, car and airplane manufacturing, petrochemical industries and many more. All of these have progressed to the magnitude never seen before, and multinational companies are at the forefront of these developments.


STATEMENT OF SCOPE, AIMS AND HYPOTHESIS

This research presents an analysis of the role of multinational companies in Serbia. As a starting point, the researcher made a short historical overview of multinational companies in general, followed by the explanation regarding their contemporary importance and their significant role in the process of globalization.

The work addresses following questions: Do multinational companies contribute to host country's socio-economic developments? What influences the success of multinational companies operating in Serbia? What re the constraints of multinational operations in Serbia?

Based on the above stated questions, the aims of this thesis are:

  • To review and understand the role of multinational companies in Serbia.

  • To identify various effects (positive and negative) which multinational companies produce when operating in Serbia.

  • To identify variables, which are influencing the success of multinational companies in Serbia.

This study, as its main contribution, has the gathering of data, relevant information and knowledge concerning the role of multinational companies in Serbia. During the research, the author investigates which forms of multinational companies are dominant in the Serbian economy, types of activities they conduct, and how the results of their performance affect Serbia and its population.

While analyzing economic development of Serbia, a conclusion is drawn that the arrival of multinational companies to Serbia is a positive phenomenon because of the following:

  • Modernization of Serbian business and entrepreneurship

  • Introducing new business logics and pragmatism into Serbian entrepreneurship

  • Strengthening of different economy sectors, which are estimated to be profitable on the national, regional and global markets, according to the evaluation of multinational companies.

  • Opening up of the Serbian economy, as well as including it into regional and global financial and economic flows (international and trans-national).

Therefore, the author forms the following hypothesis:

"Multinational companies have a significant and positive contribution to Serbia's socio-economic development and overall economic growth".

When studying this issue it is necessary to underline the geo-strategic importance of positioning a multinational company in Serbia, with the tendency for market expansion to the market of the Russian Federation, having in mind the fact that Serbia is the only European country, which has a Free Trade Agreement signed with this state.

The importance of cultural aspect is also included in the study and is intended to help overcome some of the limitations of existing theories. This approach should be extremely helpful for multinational companies' decision makers, who may wish to pursue more deeply multinational company's business patterns and operations in the region of Balkans, especially in Serbia. Therefore, the significance of intercultural management is emphasized as one of the key success factors of multinational companies in this part of Europe.


Limitations of the study

This study is designed to discover the role of multinational companies in Serbia. Such analysis throws light on the existence of multinational companies in Serbia and the role they play. The researcher acknowledges several limitations of the study:/p>

  • A relatively short tradition of multinational companies in Serbia. Until 2000 there were no multinational companies in Serbia. This situation occurred not only due to the fact that Slobodan Milo�evic - a former Serbian and ex - Yugoslavian president conducted the policy based on high-level state interventions and control in the economic sphere, but also due to economic sanctions resulting with the international embargo of Serbia's economic, financial and trade flows, and its cut of from the rest of the world.

  • Serbia was the only country in Europe which has suffered the consequences of the international embargo, while multinational companies have invaded all other countries in the region at that period. When we analyse this situation, we can conclude that Serbia lost at least one decade in the internationalisation process of its economy, and when the opening of its doors to the rest of the globalized world finally arrived, it has been additionally aggravated by the NATO interventions in 1990`s.

  • The research process by itself bore difficulties since the author had limited access to the documentation of the investigated multinational companies. The researcher obtained the data by exploiting their official websites and mainly focused on interviewing responsible managers, which resulted with certain conclusions.

  • Another type of limitation is the available literature, which offers limited body of knowledge focusing on the presence of multinational companies in Serbia. On the other hand, while investigating this issue, the author came across a number of documents including case studies on other countries in the region (Romania, Bulgaria).

DESCRIPTION OF PROCEDURES, SAMPLES AND METHODS USED

CHAPTER 1


Short historical overview on multinational companies

According to the minimalist definition, a multinational company is any company that has organizational presence in two or more country jurisdictions.

If we make a short historical overview[1], we can say that first multinational companies date way back in the end of the 17th and the beginning of the 18th century, with the establishment of corporate bodies such as East India Trade Company in Britain. First activities of multinationals consisted mostly of buying and selling products, rather than investing in production outside their home country. The actual impact of multinational companies commenced when they started investing abroad and managing those investments through organizational forms such as their affiliates and subsidiaries (Teichova, Levy Leboyer and Nussbaum 1986, Wilkins 2001). This process began as an integrated part of the internationalization of economies process in the 19th century. The dominant forms of foreign investment at the time were portfolio investments. They had been managed through financial intermediates, and involved individual investment in the shares or bonds launched by the over-seas based companies (example of the railway). These stock issues had been financed by merchant banks, which in favor, charged a certain commission.

Aside from that, the form of foreign direct investment has gradually begun to be present during the 19th century across national borders. The dominant form of this type of investment was related the need of companies for raw materials, such as coffee, oil, rubber, gold, diamonds, tobacco, sugar etc.

Therefore, the European and US companies did everything they could to ensure their access to those resources. In that period (the end of the 19th and the beginning of the 20th century) multinationals like British Petroleum, Royal Dutch Shell, American Tobacco, Rio Tinto, Lever Bros, Dunlop and Tate and Lyle, appeared.

Latin America, for instance, has for that reason been attractive for American multinational companies whose priorities for investments had been raw materials, as previously stated. Furthermore, the interest of US companies for investing in this region has been extremely high. We can draw this conclusion from the data which clearly state that only in the period from 1924 to 1928, big US multinationals like Ford, Colgate, Palmolive, British-American Tobacco and International Match have initiated their production and manufacturing operations in Mexico.

The dominant inflow of foreign capital to this region during the first half of the 20th century came from Britain, a state that had been economically dominant and present in this part of the world from the end of the 19th century. However, the more aggressive approach of American multinational companies commenced after the World War II and "The Bretton Woods Conference", which has consolidated a completely new world order and suppressed the British capital from the region.

In that period, the entire production of copper in Peru had been controlled by the US company Cerro de Pasco Copper Corporation, which invested in mining and smelting capacities and introduced the most modern technologies in the newly built Cerro de Pasco complex. The same company invested in the construction of the railway leading to the port Callao, in proximity to the capital of Lima.

In Venezuela, the Royal Dutch Shell, a multinational company partly English and partly Dutch, exploited large oil deposits, which had afterwards been refined in contemporary refineries in the island of Curacao. On the other hand, the American company Standard Oil transported raw oil from Mexico to the United States in order to refine it.

Cuba received a large inflow of foreign capital, particularly from the United States. The United Fruit Company invested in the growth of banana and other tropical fruits, and by doing this, the company directly determined the directions of the economic development of the country and the entire Caribbean region, having in mind the high level of political influence involved.

At this point I would like to emphasize that these companies were highly interdependent of the formal and informal imperial relationships of their home societies. Imperial power opened up regions for economic exploitation, managed by the emerging multinationals (Cain and Hopkins, 1993).

During the late 19th and the early 20th century, the struggle for power in Europe received additional boost by the search for colonies where the raw materials, necessary for economic and military expansion, were supposed to be located. Banking institutions commenced with the process of internationalization as well, and started opening their branches in the countries they were investing in. At that time the first hints of production in foreign countries started to appear. A Scottish thread manufacturer J. Coats established global manufacturing facilities before World War I. Some German and US companies started to produce across borders, as well.

In the years after the World War I, the internationalization process has been somewhat aggravated by the instability of political and military situation. Activities of Ford and General Motors in the United Kingdom represented a rear example of business across borders, since these types of activities were limited at the time.

After the Wall Street crash in 1929, the US overseas investments had been paused for a while. However, imperial movements in 1930s and protectionism had been used as tools for strengthening economic links between metropolitan territories and their formal and informal colonies, while at the same time solidifying the imperial position of companies such as Imperial Tobacco and Imperial Chemical Industries (Cain and Hopkins, 1993).

Protectionism in Europe helped large companies gain a position close to the monopolistic one. This became the basis of international cartels in certain technology and knowledge-based sectors where multinationals who were leaders in their own countries divided the other markets of the world among themselves, mostly on the basis of the existing informal and formal relationships (Glimstedt, 2001).

The World War II did disturb to the certain extent the presence of these companies, but many of them survived. The US companies in particular, had an intensified activity in the post-war period, since they had been implemented in the well-known Marshall plan[2], which included the flow of the US capital, meant for the reconstruction of the war - devastated Europe. This turned out to be an excellent opportunity for US multinationals to position themselves in the United Kingdom and Europe (Djelic 1999, Zeitlinand and Herigel 2000).

The Contemporary Importance of multinational companies

When observing the question of importance of multinational companies in the most recent phase of international relations, it is necessary to emphasise the importance of the globalization process as the inevitable fact of contemporary way of living, and a relevant fact for this DBA thesis.

Globalization is the process of increasing connectivity and interdependence of the world's markets and businesses. This process has speeded up dramatically in the last two decades as technological advances make it easier for people to travel, communicate, and do business internationally. In general, as economies become more connected to other economies, they have increased opportunity but also increased competition. Thus, as globalization becomes a more and more common feature of world economics, powerful pro-globalization and anti-globalization lobbies have arisen. As a term, it is very often used to refer to economic globalization, that is integration of national economies into the international economy through trade, foreign direct investment, capital flows, migration, and spread of technology.

The word globalization in what Noam Chomsky calls a doctrinal sense, is also used to describe the particular neoliberal form of economic globalization.

The appearance of the neoliberal doctrine, as a dominant model for economic development, implies to diversified knowledge of various theoretical frameworks, which are being used when analysing the phenomenon of globalization.

Namely, it is noticable that globalization is happening in the same time as the processs of regionalization, with relation to the forming of regional economic blocks, which are, depending on the various levels of their successful adaptation to the so called "open regionalism theory", positioning themselves on the global market.

This points out to the fact that contemporary world functions according to several types of interdependances. It should be said, however, that open regionalism theory enhances the globalization process, by expanding global, economic, trading, political, safety, scientific, cultural, ecological and other types of cooperation in the world, at the beginning of the 21st century.

The success of involvement of the regions that have implemented the adequate reforms in accordance with the elements of the "open regionalism theory" depends on the level of interdependence functioning amongst them.

In short, this means that before implementing the principles of the "open regionalism theory", any region must fulfill the following conditions proposed by the theory of "complex interdependence":

High degree of interactions in different levels, including political relations among countries within the region, especially when positive changes in their political orientation occurred (the process of democratization and stabilization).

Progressive digression and isolation of existing international organizations of the region from their direct bases.

Positive influences of evolving changes occurring in the framework of international relations, which in spite of all, become more fluid, open and flexible.

In the actual process of globalization, multinational companies play an extremely significant part. They have a dominant role in the process of knowledge, idea and capital transfer across borders, and especially in the linkage of rich and poor economies.

Multinationals have certainly became of enormous economic significance for developing economies, which is the subject of this thesis, having in mind that the countries of the Balkan region are in the process of transition.

The internationalization of production systems has accelerated, as multinational companies from a large number of countries have taken advantage of cheaper transportation and new communication technologies to outsource a part of their production.

The 2002 World Investment Report[3] (UNCTAD 2002) lists the world's 100 largest non- financial multinational corporations. This report ranks companies according to their foreign assets, and also provides transnationality index (based on the average score of proportion of assets/employment/ sales outside their home country). The top ten companies by foreign assets are still dominated by raw material producers (Exxon Mobil is 2nd, Royal Dutch Shell 3rd, Totalfina 8th and BP 10th. The second most important group is the car manufacturers (Ford 5th, General Motors 4th, Daimler Chrysler 7th, and Toyota at 6th). The final two are General Electric - as the highest ranked and IBM (9th), but these two cannot be classified as the most transnational companies in the sense of having the widest overseas spread, not just of assets but also sales and employment.

An important study made[4] in 2003 on major companies in the world, resulted with the following arguments about the internationalization of the world economy.

The majority of the world's largest 500 companies are multinational, meaning that they conduct their business activities in more than one country. The top 500 companies in the world made a $14 trillion of total sales in 2001. The average revenues for a firm were $28 billion, ranging from Wal/Mart at $220 billion to Takenaka at $10 billion.

From this list more than 380 companies are included in the multinational area, even if they act according to the global strategy or only home-region. Based on their extended sales we could identify 4 types of multinational company groups:

Home region oriented - at least 50% of their sales is in their home region

Bi-regional - at least 20% of their sales is in each of two regions, but less than 50% in any region.

Host region oriented - more than 50% of their sales in a market other than their home region

Global - more than 20% in sales in more than two region, but less than 50% in any region.

For the past decade, the share of cross-border capital flows has been rising, especially in the form of foreign direct investment, particularly in developing economies for which this type of investment is the dominant form of capital inflow. These investments connect financial and product markets across countries and in turn, integration of goods and capital markets help the integration of national labor markets.

International opportunities revolve around obtaining operating benefits through economies of scale, economies of scope or cost reductions.

Economies of scale opportunities exist to the extent to which a company can standardize its products across global markets or coordinate its functions across global markets.

Economies of scope refer to the opportunities related to the operating efficiency when companies invest in critical resources that can be utilized by multiple global operations.

Cost reduction opportunities are linked to the establishing of operations in markets with low labor costs.

International growth opportunities are common today when a particular country/region is vitally important to the development of global economy. China is an excellent example. Opening of Chinese economy presents numerous business opportunities for many types of industries. Companies pursue these opportunities in order to prevent their competitors from gaining a positional advantage (first mover strategy) or they follow major competitors into new global regions by learning from their mistakes (close follower strategy).

Modes of penetration of multinational companies

Firms can choose from a variety of modes to penetrate into global markets. International expansion and growth opportunities can be accomplished in three ways:

Exporting

Contractual Agreements (licensing and franchising)

Foreign Direct Investments (joint ventures, acquisitions and new holly subsidiaries)

Each of these models has their strengths and weaknesses. Therefore it is of vital importance for a firm to choose the right entry strategy in order to maximize competitive performance in global markets.

Exporting involves the transfer of goods and services to foreign countries for their sale through a company operating in that country. This model doesn't require an extended investment in the country and is often chosen by the companies who are just beginning their international expansion. The benefit of this mode is that it enables relatively low entry and exit costs and it provides a company the ability to establish its presence on the market easily and quickly. However, there are some difficulties that can arise from choosing this method, such as: high costs of tariffs and transportation, loss of control over pricing and distribution and inability to tailor goods and services to local markets.

Licensing is a contractual agreement, which involves selling the right to produce and/or sell products to foreign markets. Counterpart for licensing is franchising which focuses on the right to use a brand name and/or operating method in order to sell a service to foreign markets. These two types of contractual agreements are the least costly and most flexible modes of entry on the foreign markets, since the licensee carries the risk of investing in the manufacture, marketing and distribution of goods and services.

The negative aspect is reduced profit, since returns must be shared with the licensee. In addition, there is always the potential danger that the licensee could become a serious competitor after the agreement expires, since he learns the business.

Foreign direct investments (FDI) are the final mode of entry to the global market. The investments can occur in three ways: joint ventures, acquisitions and Greenfield ventures.

Joint venture is a cooperative agreement among two or more firms, which allows them to pursue common business objectives in the foreign market. This kind of agreement allows firms to share risks and resources necessary to expand in the global markets and contribute to the development of new organizational capabilities. These alliances tend to fail for two main reasons: conflict between partners and incompatibility of the partners.

Increasing of FDI by multinational companies has influenced international trade patterns, though in ways that are not always straightforward and generally result from series of complex interactions, which may vary from time to time. For example, outward FDI can be a substitute for exports with parent companies setting up affiliates to meet the local demand or to avoid restrictive trade policies in the host country. On the other hand, foreign investments can also be undertaken in order to take advantage of more favorable conditions in host countries, such as cheaper labor and lower taxes. It may also be associated with stronger exports in the construction phase of production facilities abroad followed by an increase in imports of finished goods at a later stage. Finally, it may be a direct complement to exports when firms undertake investment abroad to facilitate an enhance distribution of their products.

The Balkan Environment for Multinational Companies

In order to comprehend the role of multinational companies in the Balkans and Serbia, I believe it is important to analyze and explain certain phenomena, which are characteristic for the Balkan region and are dominant for the creation of the adequate environment for multinational companies. Above all I refer to the importance of the regional initiatives.

If we take a look at Europe, we can say that it is divided in three entities: the Balkans, Central Europe, Russia and the Post - Soviet region.

After the end of bipolarity era, one can notice changes that occurred within the so called ex East-European region. Three types of experiences can be identified, which influence the main topic of this DBA thesis:

The entity of Central Europe faced state level disintegration processes (example of dissolution of Czechoslovakia into the nations of the Czech Republic and Slovakia, which took effect on January 1st, 1993, referred to as the "Velvet Divorce", being divided peacefully in two separate states). At the same time the concept of the economic reform has been introduced to these countries, which ensured legal and all other preconditions for the faster penetration of multinational companies.

In other words, Central European countries clearly defined their basic objectives: economic reforms under the influence of the neo-liberal doctrine and the fastest possible entrance in the European Union and Euro-Atlantic integrations.

All of the above stated, ensured that experiences of the Central European countries represent one specific unit, which has both political and financial support of the European Union and NATO, and therefore a high level of success.

On the other hand, the Balkans and Russia and Post - Soviet region represent a completely different challenge for multinational companies, having in mind the level of their economic development, high instability and war conflict occurrence of the local and regional character, as well as different geo-strategic positions.

As far as the Balkan region is concerned, its involvement in the globalization process has been aggravated by the Yugoslavian crisis, which outgrew regional frames. It has been very difficult for European and all other multinational companies to position themselves in this region, and if we take a look at all development initiatives striving towards the Balkans, they all had a prefix "South East European" engraved in their names.

Geo-strategic and geopolitical position of the Balkans has always had determinative influence to the position of the countries of this region in international relations.

From a historical perspective, the Balkan region, as the shortest "bridge" that links Europe and Middle East, represented and still represents geographic space in which interests of the most powerful European and global forces contend.

Starting from the Berlin Congress (1878), the Balkan countries have officially been recognized as the actors of the European System of international relations, although their position was extremely vulnerable and accompanied with the high level of political and economic dependence of the Western Europe. Historical faith of the Balkans had been determined by its geographic position and various influences on the relation East - West, which became the main elements of forming regional Balkan political, economic and cultural identity.

Just how decisive this historical determination has been in the historic development of the Balkans, confirms the fact that no agreement has been reached till present time regarding the definition of this region[5]. Namely, there are two definitions of the Balkans which have been stipulated by the Austrian or German geopolitics:

The first definition states that rivers Sava and Danube in the North determine boundaries of the Balkans, and accordingly the Balkan countries are: Serbia, Bosnia and Herzegovina, Bulgaria, Greece, Albania, Macedonia, Turkey and Montenegro, while Romania and Croatia belong to this group partly. Therefore, if the northern boundaries of the Balkans are rivers Sava and Danube, the main hegemony center of the region is Vienna.

The second definition suggests that the northern boundary of the Balkans is set together with the line, which connects Carpate Mountains with the Slovenian Alps, and therefore the Balkan space is being enlarged to the whole territory y of Croatia, Romania, Moldova, Slovenia and partially Hungary. If we decide to accept this definition, it is in compliance with the attitude of German geo-politicians, which are using the notion South Eastern Europe.

The experiences of some Balkan countries that have renounced the Balkan dimension and with this action facilitated their integration in the Middle European cooperation initiatives and accordingly facilitated their convergence and accession to the European Union (examples of Romania, Bulgaria and Croatia), point out just how important these questions are.

In short, we can conclude that the notion and identity of the Balkans carry an emphasized negative connotation (balkanization as a synonym for disintegration, destabilization, conflicts and wars). Now days, the European Union even uses a new notion - concept in order to identify this region: The Western Balkans, which rounds in all countries of the former Republic of Yugoslavia, excluding Croatia, but including Albania.

This is another one of negative historic fragmentations of regional Balkan identity, which has definitely been absorbed by one wider geo-strategic and economic concept: South Eastern Europe.

Modern trends of cooperation have been delayed in the Balkans, due to the constant development of war conflicts among certain countries. This situation delayed the prosperity of the entire region, and blurred the entire integration process of these countries to join the European Union. Therefore, it is extremely important to point out the significance of regional initiatives, which concentrated on the closer regional cooperation of the Balkan countries. Regional initiatives and different forms of multilateral cooperation have somewhat compensated this delay, with their emerging in 1990s.

The major characteristic of most regional initiatives in South Eastern Europe is their organizational flexibility.

If we make a short historical overview of the regional initiatives[6] in the Balkans, we can say that different attempts aiming to the Balkan cooperation have been pursued since the end of the World War I: Balkan Conferences (1930), Balkan Entente (1934), attempts of the Balkan Union(1941) and Balkan Confederation (1945), Balkan Pact(1954), Multilateral cooperation in the Balkans (1974), Balkan Ministerial Conferences (1988) etc.

After that, majority of regional initiatives, which emerged only by the end of 1980s and in course of 1990s have been linked to two processes:

The first wave of regional initiatives had been directly influenced by the dissolution of the Eastern Block and its Council of Mutual Economic Assistance, and therefore an urgent need for replacement arose. Initiatives belonging to this group are the Central European Initiative - CEI (November 1989), the Black Sea Economic Cooperation - BSEC (June, 1992) and the Central European Free Trade Area - CEFTA (December, 1992).

The second wave of initiatives in the South Eastern Europe appeared after the Starting from the Berlin Congress (1878), the Balkan countries have officially been recognized as the actors of the European System of international relations, although their position was extremely vulnerable and accompanied with the high level of political and economic dependence of the Western Europe. Historical faith of the Balkans had been determined by its geographic position and various influences on the relation East - West, which became the main elements of forming regional Balkan political, economic and cultural identity.

Just how decisive this historical determination has been in the historic development of the Balkans, confirms the fact that no agreement has been reached till present time regarding the definition of this region[5]. Namely, there are two definitions of the Balkans which have been stipulated by the Austrian or German geopolitics:

The first definition states that rivers Sava and Danube in the North determine boundaries of the Balkans, and accordingly the Balkan countries are: Serbia, Bosnia and Herzegovina, Bulgaria, Greece, Albania, Macedonia, Turkey and Montenegro, while Romania and Croatia belong to this group partly. Therefore, if the northern boundaries of the Balkans are rivers Sava and Danube, the main hegemony center of the region is Vienna.

The second definition suggests that the northern boundary of the Balkans is set together with the line, which connects Carpate Mountains with the Slovenian Alps, and therefore the Balkan space is being enlarged to the whole territory y of Croatia, Romania, Moldova, Slovenia and partially Hungary. If we decide to accept this definition, it is in compliance with the attitude of German geo-politicians, which are using the notion South Eastern Europe.

The experiences of some Balkan countries that have renounced the Balkan dimension and with this action facilitated their integration in the Middle European cooperation initiatives and accordingly facilitated their convergence and accession to the European Union (examples of Romania, Bulgaria and Croatia), point out just how important these questions are.

In short, we can conclude that the notion and identity of the Balkans carry an emphasized negative connotation (balkanization as a synonym for disintegration, destabilization, conflicts and wars). Now days, the European Union even uses a new notion - concept in order to identify this region: The Western Balkans, which rounds in all countries of the former Republic of Yugoslavia, excluding Croatia, but including Albania.

This is another one of negative historic fragmentations of regional Balkan identity, which has definitely been absorbed by one wider geo-strategic and economic concept: South Eastern Europe.

Modern trends of cooperation have been delayed in the Balkans, due to the constant development of war conflicts among certain countries. This situation delayed the prosperity of the entire region, and blurred the entire integration process of these countries to join the European Union. Therefore, it is extremely important to point out the significance of regional initiatives, which concentrated on the closer regional cooperation of the Balkan countries. Regional initiatives and different forms of multilateral cooperation have somewhat compensated this delay, with their emerging in 1990s.

The major characteristic of most regional initiatives in South Eastern Europe is their organizational flexibility.

If we make a short historical overview of the regional initiatives[6] in the Balkans, we can say that different attempts aiming to the Balkan cooperation have been pursued since the end of the World War I: Balkan Conferences (1930), Balkan Entente (1934), attempts of the Balkan Union(1941) and Balkan Confederation (1945), Balkan Pact(1954), Multilateral cooperation in the Balkans (1974), Balkan Ministerial Conferences (1988) etc.

After that, majority of regional initiatives, which emerged only by the end of 1980s and in course of 1990s have been linked to two processes:

The first wave of regional initiatives had been directly influenced by the dissolution of the Eastern Block and its Council of Mutual Economic Assistance, and therefore an urgent need for replacement arose. Initiatives belonging to this group are the Central European Initiative - CEI (November 1989), the Black Sea Economic Cooperation - BSEC (June, 1992) and the Central European Free Trade Area - CEFTA (December, 1992).

The second wave of initiatives in the South Eastern Europe appeared after the disintegration of The Federal Republic of Yugoslavia, the war in Bosnia and Herzegovina and later on Kosovo, as an attempt to find mutual regional strategy, which could resolve these problematic issues (Conference of Southeast European Countries, 1996; Royaumont Process, 1996; SECI 1997; Stability Pact, 1999).

Regional initiatives have undoubtedly had a positive influence to the region of the South Eastern Europe. They encouraged various forms of cooperation, referring to the administration, business and other circles in the region by reducing barriers, facilitating communication in the region. In addition, they influence public opinion and create a sense of common objectives between the countries, overcoming narrow-minded nationalism and a sense of national "self sufficiency". One of the main advantages relevant to this DBA thesis, is that they attract international finance and facilitate transborder projects.

Although the regional initiatives had an overall positive influence on the region, these forms of cooperation didn't make a significant contribution on the integration process of the Balkan countries to the European Union, nor did they make a meaningful change in the region's political, economic and social settings.

Furthermore, an important aspect for the region is also the relationship of the European Union towards the Balkan countries, but since this is not the topic of the thesis I won't pursue it further on.


[1] A. Rugman and T.L. Brewer (eds.) "The Key Literature on IB Activities" 1960 - 2000 (Chapter: Understanding Multinational Corporations, Glenn Morgan"), The Oxford Handbook of International Business, Oxford University Press

[2] The Marshall Plan had officially been conceded in Harvard on June 5th 1947 and named after the Secretary of State George Marshall. The main idea of the project was to help West European countries overcome enormous devastations that occurred during the World War II. The yearly American funding dedicated to the reconstruction of Europe was estimated at 5 billion dollars. Furthermore, the United States insisted that Germany should be kept within the frames of the capitalist system, knowing that Lenin and Stalin believed that appending of Germany to the socialist system would inevitably lead to the world revolution.

[3] United Nations Conference on Trade and Development - UNCTAD 2002, World Investment Report 2002

[4] Rugman A., Verbeke A., "A perspective on regional and global strategies of multinational enterprises", Journal of International Business Studies (2004) 35, 3-18

[5] For further information regarding the history of the Balkans and its future one should consult: Branko Horvat "Historia de Los Balcanes y perspectives de futuro", in : Jose Giron y Slobodan Pajovic, Eds., Los nuevos Estados de la Antigua Yugloslavia, Universidad de Oviedo, Espana, 1999, pp. 113 - 136

[6] Lopandic D., PhD, "Regional Initiatives in South Eastern Europe" Institute for International Policy and Economy European Movement in Serbia, 2004

Source: Essay UK - http://turkiyegoz.com/free-essays/economics/multinational-companies.php


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