DEVELOPMENT THROUGH SUSTAINABLE FOREIGN DIRECT INVESTMENT
A TTRACTING AND M AINTAINING I NVESTMENT IN E MERGING M ARKETS : A CASE
STUDY OF THE W ORLD T RADE O RGANIZATION
Monique Tashini Jensen
(110771)
Supervisor: Niels Le Duc Copenhagen Business School
15th of September 2021
Master Thesis in MSc. International Business and Politics (CPOLO1008E)
Contract no. 19110
Acknowledgements
I would like to acknowledge and thank all those who have assisted and supported me in the process of writing this master’s thesis.
Firstly, I would like to express my deepest gratitude and thanks to my supervisor, Niels Le Duc, for his support and guidance through this master’s thesis. I truly appreciate the time and effort he has put into my supervision and for the great knowledge, expertise and professionalism he has provided. His feedback and guidance have indeed been vital for the results and outcome of this thesis.
Secondly, I would like to thank my supervisor during my internship at the Danish Permanent Mission to the UN, in Geneva, Mads Thuesen Lunde. I am very thankful for the trust, responsibility and opportunities he has given me in taking part in negotiations of the World Trade Organization and thus developing my interest in the organization. He has furthermore put me in contact with experts within sustainable FDI to increase my knowledge on the chosen topic. In this relation, I would also like to thank one of the experts, Anders Aeroe. Anders has been a great help in connecting me with his network and the chosen interviewees for this research.
Hence, I am also very grateful to the interviewees that have taken time off to participate in this research. Their knowledge and expertise constitutes the core of this master’s thesis. More specifically, my appreciation goes to interviewees from the organizations; the International Trade Centre (ITC), the Organization for Economic Cooperation and Development (OECD), the International Institute for Sustainable Development (IISD), the German Development Institute (D.I.E), the World Economic Forum and the Columbia Center on Sustainable Investment (CCSI).
Executive Summary
In a dynamic, globalized and constantly evolving world, there is a need for development that is sustainable and promotes the economic, environmental, social and governance aspects of development. Hence, foreign direct investment (FDI) has in recent years gained attention as it can enable sustainable development, particularly in emerging markets. Intergovernmental organizations, such as the World Trade Organization play a key role in shaping a multilateral trading system which can advance foreign direct investment to facilitate sustainable development.
However, the WTO is currently facing a ‘make-or-break’ moment in which it is necessary for the WTO to revitalize the confidence in the WTO agreements. Thus, this research has developed the question;
How can the WTO facilitate in attracting and maintaining sustainable foreign direct investment for development in emerging markets? To answer the research question, this thesis provides a combined theoretical framework on; sustainable FDI, stakeholders and the theory of orchestration.
Thereby, contributing to fill a salient gap in the literature on sustainable FDI. This thesis is conducted as a qualitative research of semi structured interviews with experts working in international organizations, related to the WTO. Hence, by applying the combined theoretical framework to the empirical findings, an in-depth analysis of the specific possibilities for the WTO, is provided. In doing so, this thesis identifies how the WTO should perceive sustainable FDI, the influence of the identified stakeholders and which specific means can be used to both attract and maintain sustainable FDI.
This analysis leads to a discussion of the level of compliance in the WTO agreements on investment facilitation for development and whether the next step is to adopt already existing frameworks or create new ones.
Table of content
1.Lists 6
1.1 List of Abbreviations 6
1.2List of Tables 7
2.Introduction 8
3.The World Trade Organization 10
3.1 Organigram of the WTO 11
3.2 The WTO and Other Organizations 13
3.3 Investment Facilitation for Development 13
4.Conceptual and Contextual Delimitations 14
4.1 A Multilateral Context 14
4.2 Emerging Markets and Developing Countries 14
5.Theoretical Framework 16
5.1 Foreign Direct Investment 16
5.1.1 Types of FDI 17
5.1.2 Knowledge spillover 17
5.1.3 Location specific advantages 18
5.1.4 Characteristics of sustainable FDI 19
5.1.5 Summary of sustainable FDI 22
5.2 Stakeholders 22
5.2.1 Strategic management 23
5.2.2 Attracting and maintaining Investment 25
5.2.3 Summary of stakeholders 28
5.3 Orchestration 28
5.3.1 The O-I-T model 29
5.3.2 State and non-state actors 30
5.3.3 Hard and soft regulations 31
5.3.4 Summary of orchestration 32
6. Method 33
6.1 Philosophy of Science 34
6.2 Research Approach 35
6.3 Research Strategy 36
6.4 Research Design 38
6.5 Ethical Considerations 41
6.6 Techniques and Procedures 42
7. Analysis 46
7.1 Sustainable FDI 46
7.1.2 The WTO and sustainable FDI 46
7.1.3 Quantity or quality? 47
7.1.4 The current WTO negotiations 49
7.1.5 Sub-summary of sustainable FDI 51
7.2 Stakeholders 52
7.2.1 Host country governments 53
7.2.2 Home country governments 55
7.2.4 Financiers (Shareholders) 57
7.2.5 Investment promotion agencies 58
7.2.6 Civil society 58
7.2.7 International organizations 59
7.2.8 State actors 61
7.2.9 Sub-summary of stakeholders 61
7.3 The WTO as an Orchestrator 63
7.3.1 The role of the WTO 63
7.3.2 Disputes in the WTO 64
7.3.3 Specific incentives to attract investment 66
7.3.4 Specific incentives to maintain investment 68
7.3.5 Sub-summary of the WTO as orchestrator 68
8. Discussion 69
8.1 How Should We Perceive Sustainable FDI? 70
8.1.1 Analyzing different needs 70
8.2 Influence of Stakeholders 72
8.2.1 The WTO creating a level playing field 73
8.3 Specific Means Used by the WTO 74
8.3.1 The alphabet soup 75
8.3.2 Risk of new reporting frameworks 76
8.4 Contributions 77
8.5 Limitations and Further Research 78
9.Conclusion 79
10.Bibliography 80
11.Appendices 85
11.1 Interview guide 85
11.2 Interviews 86
11.2.1 Interview 1 86
11.2.2 Interview 2 96
11.2.3 Interview 3 102
11.2.4 Interview 4 108
11.2.5 Interview 5 116
11.2.6 Interview 6 122
11.2.7 Interview 7 136
11.2.8 Interview 8 143
12.Figures and Tables 149
12.1 Table of Emerging Markets, 2019 (top foreign stocks) 149
12.2 Table over disputes in the WTO 150
BRIC: Brazil, Russia, India, China CCSI: Columbia Center on Sustainable Investment
CSR: Corporate Social Responsibility D.I.E: Deutches Institut für
Entwicklungspolitik (the Germen Development Institute)
FDI: Foreign Direct Investment
ESG: Environmental Social and Governance criteria
EU: European Union
FSB: Financial Stability Board
GATT: The General Agreement on Tariffs and Trade
GC: General Council
JSI: Joint Statement Initiatives
ICTSD: International Centre for Trade and Sustainable Development
IFC: International Finance Corporation IFD: Investment Facilitation for Development IGO: Intergovernmental Organizations
IISD: International Institute for Sustainable Development
ILO: International Labor Organization IMF: International Monetary Fund MC: Ministerial Conference
MNE: Multinational Enterprise
NGO: Non-Governmental Organizations NGR: Negotiating Group on Rules OECD: Organization for Economic Co- operation and Development
SDG: Sustainable Development Goals SDT: Special and Differential Treatment SME: Small And Medium Sized Enterprises TCFD: Task Force on Climate related Financial Disclosures
UN: The United Nations
UNCTAD: United Nations Conference on Trade and Development
WTO: The World Trade Organization
1.2 List of Tables
Table 1: Organigram of the WTO, 2021 Table 2: The O - I - T model
Table 3: Instruments of regulation Table 4: Illustration of Research Onion Table 5: Illustration of retroduction Table 6: Table of interviews conducted
Table 7: Illustration of main codes and sub- codes
Table 8: Categorization of consensus in the WTO
Table 9: Illustration of stakeholders mentioned by interviewees
Table 10: Summary of stakeholders’
responsibility, influence, limitation and risks
2. Introduction
This master’s thesis seeks to investigate investment facilitation for development (IFD) through sustainable foreign direct investment (FDI). In doing so, the research question is as follows;
“How can the WTO facilitate in attracting and maintaining sustainable foreign direct investment for development in emerging markets?”
This paper is conducted as a qualitative research based on interviews from experts within sustainable FDI, working in international organizations, related to the World Trade Organization (WTO). Sustainable is here understood as both economic, environmental, social, and governance characteristics.
The main relevance of this master’s thesis reflects the increasing need for sustainable development.
Along globalization, FDI has become more crucial in facilitating development in a global community (OECD, 2021). FDI can enable development regardless of a countries’ maturity and level of sophistication. However, emerging markets have great potential for rapid development due to investment friendly conditions caused by their recent and continuous industrial and technological development (WTO, 2021).
The economic impact combined with extended lockdowns, due to the current pandemic, COVID-19, has contributed to a distinct decline in FDI flows. Global investment flows have decreased by 42 percent in 2020 compared to 2019, particularly in developing countries and emerging markets (D.I.E
& ITC report, 2021). This makes it urgent for governments to act and to attract more FDI in order to rebuild society and foster economic, environmental, social and governance development.
Intergovernmental organizations such as the United Nations seek to enhance this development through the Sustainable Development Goals (SDGs) (UN, SDG, 2021). An UN organ that can possibly contribute to a sustainable development is the WTO which has recently started to increase their awareness of investment facilitation for development (WTO, 2021). The WTO is currently facing a
‘make-or-break’ moment caused by the lack of consensus on core WTO bodies (EU Commission, 2021). The WTO needs to inject confidence into the global development by increasing transparency,
enhancing cooperation and streamlining procedures. Hence, the WTO is more than ever depending on the influence of stakeholders working with the WTO to facilitate a successful outcome of the WTO negotiations on IFD.
Therefore, this thesis seeks to investigate how the WTO can both attract and maintain sustainable FDI, in particular for emerging markets. There is already vast literature on FDI, and stakeholders related to FDI, as well as the means used by intergovernmental organizations such as the WTO.
Nevertheless, there is a lack of identification of what specific incentives and how sustainable FDI can be attracted and maintained. This research contributes to fill the gap in the literature by combining the characteristics of sustainable FDI, a stakeholder framework and orchestration and thus applying this combined theoretical framework to the organization of the WTO.
This research does firstly provide information about the WTO as an organization together with a clarification of the context it operates within. Secondly, the following section goes into depth with the literature chosen for the theoretical frameworks; sustainable FDI, stakeholder theories and the theory of orchestration. Thirdly, this research elaborates on the qualitative method chosen, the research approach and strategy. Subsequently, the theoretical framework is applied to the interviews, moving into an in-depth analysis of the findings. This leads to a discussion of the implications of the core findings as well as a discussion of the specific means that the WTO can use.
Lastly, this thesis considers possible limitations of the thesis together with potential further research, resulting in a conclusion to answer the research question.
3. The World Trade Organization
The World Trade Organization is an intergovernmental organization (IGO) and is the only global organization that deals with the rules of trade between nations worldwide (WTO, 2021).
The goal of the WTO is to reach consensus on trade agreements that revolve procedures of goods and services, exports, imports, business services and conduct of businesses (Ibid). The WTO is located in Geneva, Switzerland, where the official negotiations take place. The Organization consists of 164 member states, representing 98 percent of all world trade (Ibid).
The institution building of the WTO was an unintended outcome of the Uruguay Round negotiation from 1986 to 1994 (GR. Winham, 1998). There was a lack of coherence between international cooperation and institutional economic policy making and thus a missing coherence between the General Agreement on Tariffs and Trade (GATT) and International Monetary Fund (IMF). For this reason, the WTO was established 1st of January 1995, as an attempt to connect trade facilitating policies and promote economic development (Ibid).
The primary goal for the WTO is to facilitate trade across nations and create a level playing field for the member states to negotiate trade related matters (WTO, About WTO, 2021). The way in which the WTO creates influence, rules and regulations is based upon consensus among the WTO member states (Ibid). The member states of the WTO have created simple principles of a multilateral trading system to negotiate all trade and trade related aspects within the WTO, (WTO, 2021). Having said that, there is no guarantee that a multilateral trading system ensures complete agreement among all member states. According to the WTO, the organization can facilitate trade in the following 10 areas;
“1: Cut living costs and raise living standards, 2: Settle disputes and reduce trade tensions, 3:
Stimulate economic growth and employment, 4: Cut the cost of doing business internationally, 5:
Encourage good governance, 6: Help countries develop, 7: Give the weak a stronger voice, 8:
Support the environment and health, 9: Contribute to peace and stability, 10: Be effective without hitting the headlines” (WTO, 2021).
3.1 Organigram of the WTO
The WTO is built upon a hierarchical structure consisting of different WTO bodies as illustrated in the organigram below (Table 1).
Table 1, Organigram of the WTO (WTO, 2021)
The most influential and important negotiations within the WTO, is the Ministerial Conference (MC).
This conference is held every two years, counting the 12th ministerial conference (MC12), being held in 2021 (WTO, Ministerial Conference, 2021). Only ministers and top decision makers from all member states or custom unions are allowed to participate in the ministerial conferences. The Ministerial Conference is where the most essential topics are debated and action is taken on all matters under all multilateral trade agreements (Ibid).
The second most influential organ of the WTO is the General Council (GC) which is the highest-level- decision-making body in WTO and is held in Geneva, Switzerland (WTO, GC, 2021). Member states meet regularly, approximately once every two months, to discuss general matters on all trade topics and in case of external political global events that might affect trade and trade agreements in the WTO (Ibid). Attending members for the GC primarily consist of ambassadors or equivalent to ambassadors (Ibid).
As seen from the chart above (Table 1), below the GC comes the various committees and councils on specific topics. These committees and councils are formed during the General Council meetings and take place regularly depending on the pace of the negotiations and the level of compliance and agreements among member states in the committees and councils (WTO, Committees, 2021). The latter organs are based on the most reoccurring, most debated and most relevant trade related topics among member states and custom unions (Ibid).
Besides the committees and councils, some states form working groups; Negotiating Group on Rules (NGR) or Joint (Statement) Initiatives (JSI). NGR typically cover anti-dumping, countervailing measures and subsidies. JSI is a plurilateral negotiating tool that is initiated by a group of WTO members that start negotiating on a specific topic. These groups do often not adhere to the rule of consensus in decision making and the topics of negotiations are typically topics where the WTO have limited jurisprudence as in E-commerce or investment facilitation (WTO, 2021). Suggestions and proposals for legal texts, rules and regulations are initiated by specific members states, purposed for meetings and joined, or opposed, by the states that find the topic important to be negotiated (Ibid).
3.2 The WTO and Other Organizations
As the WTO is an IGO, it works with a number of other international governmental and non- governmental organizations in order to seek coherence with trade agreements (WTO, 2021). In this context, coherence means a global economic policy-making that goes beyond the WTO’s specific cooperation with the World Bank and IMF (WTO, Other Organizations, 2021). According to the WTO;
“In all, the WTO Secretariat maintains working relations with almost 200 international organizations in activities ranging from statistics, research, standard-setting, and technical assistance and training” (WTO, Other Organizations, 2021). To clarify, these organizations working with the WTO seek to keep the WTO informed, retract data and uphold their legitimacy. In doing so, there are approximately 140 international organizations that have observer status in WTO bodies, meaning that they follow negotiations and discussion within the WTO (Ibid).
3.3 Investment Facilitation for Development
The WTO works on several aspects of trade and trade related topics. Until 2017, investment facilitation has not been of high priority on the WTO agenda (Berger & P. Sauvant, eds., 2021).
However, investment facilitation is essential for development which is in particular important in a post-pandemic crisis (Ibid). Investment facilitation for development can be used as a way to increase development in developing and emerging member states of the WTO and is in particular used to meet the SDGs (Ibid). From the 11th Ministerial Conference in December 2017, a JSI was formed from member states to increase IFD where 70 member states joined the initiative (WTO, IFD, 2021).
Since 2017, a second proposal on IFD has been issued and now has 100 member states supporting the negotiations going forward (WTO, IFD, 2021). Trade and investment are essential in helping countries integrate in a global economy (WTO, IFD, 2021). As stated by the previous Director General, Roberto Azevêdo; “IFD is a forum that provides an important opportunity to share ideas and to ensure we seize all of the tools available to us in the search for stronger growth and more sustainable development” (Roberto Azevêdo speech, 2017). Thus, this JSI seeks to increase development by facilitating investment. Investments do not only boost the economy but facilitate in overcoming supply side constraints, promote diversification of the productive structure, adding value to exported products and reduce dependency on basic commodity exports (WTO, IFD, 2021).
4. Conceptual and Contextual Delimitations
Sustainable investment facilitation for development is generally speaking a global concept to facilitate a global, transparent, efficient and investment-friendly environment (Berger & P. Sauvant, Eds., 2021). It is therefore seen in a global and multilateral context in which there is a difference in investment facilitation for different economies and markets. For this reason, the following section firstly outlines the multilateral context that the WTO works in. The subsequent section provides the definition of emerging markets, which this thesis investigates, and the difference between emerging markets and developing countries.
4.1 A Multilateral Context
This thesis focuses on sustainable foreign direct investment in a multilateral context. Multilateralism is used in international relations and means alliance of multiple countries that pursue a common goal (Dictionary, 2021). The WTO works in a multilateral trading system in particular with rulemaking, regular work and transparency (European Union, 2018). The multilateral context does in this research cover the so-called ‘global community’, where nations are interdependent in facilitating global change (Berger & P. Sauvant., Eds., 2021). In line with this reasoning, this research investigates the WTO negotiations and possible solutions in a multilateral context. Hence, the level of analysis is on a macro and meso perspective between nations and organizations, rather than micro level between individuals or small systems (Syracuse University, 2021). Hence, this research does not go into depth with bilateral initiatives between member states of the WTO, but rather multilateral and plurilateral agreements, and negotiations and initiatives between several member states of the WTO.
4.2 Emerging Markets and Developing Countries
This thesis investigates how the WTO can facilitate in attracting and maintaining investment specifically for emerging markets. Thereby, excluding developing countries and developed countries. There are specific characteristics for emerging markets and how they differ from developing and developed countries (Bizfluent, 2018). The IMF characterizes emerging markets based on three factors; per capita income, export diversification and the degree of integration in the global financial markets (IMF, 2021). Emerging markets are characterized as markets that have
undergone growth due to technological and industrial development, but far from the same extend as developed countries (Ask any difference, IMF, 2009). In comparison to developing countries, emerging markets are more favorable to invest in as they have greater export conditions. This is due to more business-friendly policies, an increase in domestic production and less reliability on agriculture (Ibid). Thus, emerging markets are not as unstable in terms of political framework. Here, instability and volatility is mostly caused by few unstable governments and few industries (IMF, 2021).
Unlike emerging markets, developing countries have not undergone the same development through industrialization. On the contrary, developing countries are more reliant on agriculture and are not as desirable to invest in due to lack of stable governments and political regime (Ask any difference, IMF, 2009). Thus, the position of developing countries in terms of global finance is characterized by less FDI, more currency devaluation and higher rates of inflation. According to the IMF, there are around 40 countries in the world that rank as emerging markets or middle-income countries. The largest emerging markets are known as the BRICs (Brazil, Russia, India and China) (The Balance, 2021). The BRIC countries represent 42% of the world population, 23% of the GDP, 30% of territory and 18% of all global trade. Hence, these emerging markets pose great potential for FDI and have potential for even greater development by attracting and maintaining sustainable FDI (BRICS, Brazil, 2019). Common for the BRIC countries is their development through industrialization and technological development. There are significant common denominators for those emerging markets as they are more trade-friendly, compared to developing countries. This is due to more calculated policy, healthy cash balance, employment growth and thus greater potential for more FDI (Ask any difference, IMF, 2009). View appendix 12.1 for an overview of all emerging markets (Appendix 12.1).
Having said that, this research focuses on emerging markets in general, which all have different potentials and different limitations. As this thesis investigates how the WTO can facilitate development for emerging markets, the context is limited to those countries viewed in the table 12.1 (Appendix 12.1). Hence, the theoretical framework, findings and discussion of this thesis does
not exclude that some findings can be applicable to other types of economies, but it is not the aim of this research.
5. Theoretical Framework
In answering the research question of how the WTO can facilitate in attracting and maintaining sustainable FDI for development in emerging markets, it is of great importance to draw upon relevant literature and use a holistic approach towards the research to explore literature relevant to the topic of sustainable FDI. In doing so, this study identifies three main theories; sustainable FDI, theoretical frameworks on stakeholders and lastly, literature on orchestration.
The first section includes literature that defines sustainable FDI. This section recounts the arguments of how FDI affects development in emerging markets. As this study focuses on sustainable FDI, the literature included sheds light on the core distinctions and characteristics that can facilitate in determining when FDI is sustainable. The second theoretical section explores the literature concerning relevant actors and stakeholders engaging in FDI. Furthermore, their influence and role in the process of investment facilitation as well as maintaining sustainable FDI. The third section of the theoretical framework concerns the means and instruments that international organizations and IGOs use to affect sustainable FDI. This section focuses on both state and non-state actors when acting as orchestrators.
5.1 Foreign Direct Investment
As this research seeks to instigate how the WTO can facilitate sustainable FDI, this following section discovers the relevant literature used to define what sustainable FDI consists of. FDI is broadly defined as an investment involving a long term and lasting relationship, reflecting a lasting interest and control by a resident entity in one economy (foreign direct investor or parent enterprise) in an enterprise resident in an economy other than the one of the foreign direct investor (enterprise, affiliate enterprise or foreign affiliate), (OECD, 2021). Alongside globalization, FDI has become a substantial part of the type of investment for particularly Multinational Enterprises (MNEs) and Small and Medium Sized Enterprises (SMEs) (McAllister & P. Sauvant, 2011). The global financial crisis, in 2007-2008, has led to domestic downturn which has made it crucial for multinational
5.1.1 Types of FDI
When speaking of FDI, there are several aspects and definitions of what FDI consists of. One aspect of FDI is by Joshua Aizenman & Nancy Marion described as vertical and horizontal FDI (Aizenman &
Marion, 2003). Horizontal and vertical integration is one of the core distinctions between FDI as the process, aim and outcome differ. Vertical FDI is when multinational fragments of a production process are separated by locating each stage of the production in the country where it can be produced at the lowest cost (Ibid). Horizontal FDI, on the other hand, is when the same multinational production takes place in multiple countries (Ibid). According to this distinction of vertical and horizontal FDI, it is by Aizenman & Marion stated that vertical integration poses greater risk for the investor, as the production is fragmented and dependent on many locations, compared to horizontal integration. This is with the line of reasoning that when a company moves their production due to lowest cost of production, they might not spend the resources on insuring good working conditions for the labor as this is costly.
Furthermore, the countries where production is cheapest are likely to be countries with weaker political frameworks (Ibid). Thus, vertical FDI is expected to cause more predatory actions from a host country. Vertical FDI is thereby costlier to the multinational in case of any predatory action, compared to horizontal FDI (Ibid). This literature also argues that vertical FDI is more likely to occur in emerging markets and horizontal FDI into more mature markets. This literature and distinction of FDI recounts the risks and benefits of vertical and horizontal FDI but is viewed mostly from the multinational company’s perspective. It does therefor not explicitly state how FDI can become sustainable and is insufficient in determining sustainability factors.
5.1.2 Knowledge spillover
From a host country’s perspective, the increase in FDI inflows can potentially give positive externalities in terms of knowledge spillover. A positive knowledge spillover would mean that the indigenous firms and local companies can learn from the FDI inflows in terms of new products, technologies, marketing and business management, which can beneficially be implemented to their own firms (Javocik, 2013). An example of such is through foreign affiliates engaging into
downstream sectors and increasing demand for inputs. This can in turn create incentives for the local firms to invest in cost-saving, potential upgrading or increased capacity. Another developmental outcome for the host country can, (partly based on knowledge spillover), lead to an increase in the level of competition, a change in market structure and a more liberal environment for investors (Javocik, 2013). The degree of development for an emerging market includes that firms give back to the host country in positive externalities by knowledge spillover, job creation and/or development of the economy (Ibid). It can be stated that positive externalities such as knowledge spillover contribute to a sustainable development. However, it lacks in defining which areas those externalities cover i.e. social, environmental, governance or labor. Thus, this framework is very context dependent and not specific enough to define sustainable FDI.
5.1.3 Location specific advantages
In line with the literature on vertical FDI, one reason for investors to invest in emerging markets is due to the location specific advantages (Dunning, 2009). These benefits can consist of cheaper labor, extraction of natural resources, lack of rules and regulation and a weaker political regime which makes it less restrictive for investors to enter developing countries and emerging markets (Ibid).
MNEs tend to be attracted to these location specific advantages such as certain services, manufacturing, natural resources and infrastructure. Due to the scale and scope of MNEs, there is a risk for specific cultural industries and SMEs to meet too much competition and be outcompeted by big conglomerates (Ibid).
Furthermore, FDI into emerging markets is viewed both from the host country and the home country’s perspective. From the host countries’ perspective, one of the ways FDI can facilitate economic development is though creation of jobs. An investment into an emerging market means more jobs and in most cases a higher paid wage compared to domestic companies (Dunning, 2009).
In addition to higher wages, foreign employees tend to put emphasis on better training for employers as it is also in their interest to make their labor more skilled, while at the same time benefitting from the lower average wages in emerging markets (Ibid). Hence, job creation can facilitate in development for an emerging market. However, not all jobs are perceived as good jobs if they do not facilitate good working conditions for the local labor (Ibid). In line with the above
literature on facilitating development for emerging markets through FDI, this literature lacks in covering both political, social and economic determinants for a sustainable development. For this reason, it is not used as the main theoretical framework concerning sustainable FDI.
5.1.4 Characteristics of Sustainable FDI
The above literature accounts for possible negative and positive externalities derived from FDI. Yet, they do not go into depth with a definition of sustainable FDI. Nor does the previous literature cover sustainable traits or characteristics for sustainable FDI. For this reason, the following section provides a framework for vital determinants for sustainability and the characteristics that are used throughout this research.
A broad definition of sustainable FDI is by Karl P. Sauvant and Khalil Hamdani described as;
“Commercially viable investment that makes a substantial contribution to the economic, social and environmental development of host countries and takes place in the framework of fair governance mechanisms” (P. Sauvant & Hamdani, 2015). According to Karl P. Sauvant, to make investments benefit emerging markets, the level and amount of FDI has to increase substantially. Moreover, when investing in emerging markets, the investor has to take essential determinants into consideration, namely; economic determinants, the political framework and the promotion of FDI (P. Sauvant, 2008).
The economic determinants refer to the economy of the host country, the host countries’ market size and its growth rate (P. Sauvant, 2008). The economic determinants therefore also entail the countries’ infrastructure, the quality of the human resources, the network, and the price of labor, export and import together with their natural resources (Ibid). Those economic determinants are crucial for development in emerging markets and to consider, when making an investment.
Investors might hesitate to invest in an economy if there is lack of economic determinants or lack of potential growth (P. Sauvant & Gabor, 2019).
The political framework of the host country is essential for development of an emerging market (P.
Sauvant, 2008). For the regulatory framework to facilitate in development, it needs to be viewed
both from the investors’ point of view and the host country. The political regime and framework needs to be enabling enough to attract investors, have rules and regulations but simultaneously not be too regulative in the sense that it would limit or slow down the investment procedure and formalities (Ibid).
Finally, investors should consider the host countries’ ability to attract investment to their economy.
Thus, meaning that host countries can engage in different initiatives i.e. with investment promotion agencies to attract foreign investors and give various aftercare services and advice in terms of government regulations. Furthermore, emerging markets can benefit from help in terms of gaining and developing the process and entry level requirements into the country. This is both to make it easier for investors to receive transparent information and to promote the interest of development for the emerging country (P. Sauvant & Mann, 2017).
The issue is not only how to attract more FDI for development in emerging markets but more so to attract FDI that makes a substantial contribution to a sustainable development (P. Sauvant & Mann, 2017). After all, it would not make sense from the host countries’ perspective to allow inward FDI if the cost and expenses created by these investments is higher than the social or economic benefits.
Similarly, these considerations relate to whether a sustainable investment is an investment that
‘does no harm’ or does ‘active efforts’ to do good (P. Sauvant & Mann, 2017 p. 6).
In seeking to determine which factors that are essential in sustainable FDI, it is relevant to view the sustainable development agenda through a holistic view of both economic and social goals. Hence, four main sustainable characteristics are used in this research to characterize sustainable FDI, namely; Economic, Environmental, Social and Governance and are elaborated upon in the below section (P. Sauvant & Mann, 2017). However, it should be noted that this framework is built upon MNEs specifically, as the concept includes research on MNEs. The characteristics should not be seen individually but rather as a broad categorization where some characteristics may overlap (Ibid).
5.1.4.1 Economic Characteristics
This economic characteristic aligns with the UN SDGs in target 17.3 which is to “mobilize additional financial resources for developing countries from multiple sources” (UN, SDG, 2015). Focusing on the specific indicator under this point; “Foreign Direct Investment (FDI) as a proportion of total domestic budget”. Similarly, point 17.5 of UN SDGs denotes that nations “Adopt and implement investment regimes for least developed countries” (UN, SDG, 2015). Economic characteristics do furthermore consist of the creation of local linkages and the ability to develop the local community.
This means that the investors facilitate in combining different resources and data such as customers, employees, actors and resources (P. Sauvant & Mann, 2017). Local linkages become another important element of community development which also contributes to economic growth.
Furthermore, from the accumulate wealth being created from FDI, the responsibility of equitable distribution of wealth follows (ICTSD, 2018). To summarize, this denotes that the wealth and financial means of the country are distributed somewhat fair and equal among the population (The Economist, 2018).
5.1.4.2 Environmental Characteristics
The environmental characteristics do to a great extent relate to natural resources and management of resources (ICTSD, 2018). This resource management relates to tangible assets such as natural resources as well as intangible assets such as people and time (Ibid). Moreover, complying to environmental characteristics entail that the company lives up to pollution standards and prevent loss of biodiversity. In this relation, waste reduction and water use are important areas to be measured (P. Sauvant & Mann, 2017). Thus, investors should be considerate of the consumption and amount of waste they produce together with how their waste is managed and disposed. In terms of products and services, the investors should seek to use renewable energy and do least possible damage to the environment (Ibid).
5.1.4.3 Social Characteristics
Regarding social characteristics, there are various parameters that foster social development. One is skill enhancement which means that the investor seeks to enhance the skill training of the labor in the host country (ICTSD, 2018). Additionally, concerning labor, the investor should provide fair
wages, benefits, and adhere to different aspects of public health regulations in the host country (ICTSD, 2018). Beyond living up to these labor rights and regulatory frameworks, the investor should protect the indigenous peoples’ rights through cultural heritage protection and seek to uphold an equal and non-discriminatory gender distribution (P. Sauvant & Mann, 2017). Meaning that the investor does not change or act superior over the host country’s culture or societal norms (Ibid).
5.1.4.4 Governance characteristics
Lastly, the characteristics of good governance mechanisms cover both environmental and social assessments. One important characteristic in this relation is the prevention of corruption (ICTSD, 2018). Anti-corruption prevents compliance with corruption, related corruption regulations of the host country and prevention from bribery of public officials (P. Sauvant & Mann, 2017). Preventing potential risk for the company is also part of governance characteristics in which risk-management can include prevention of financial instability, compliance with legal liabilities, prevention of strategic management errors and coverage in case of natural disasters, force major or unforeseen incidents (Goswami, 2013).
5.1.5 Summary of Sustainable FDI
The above section outlines relevant literature on FDI and emerging markets’ development. Having addressed the vast literature on FDI, this research is drawing upon the definition of sustainable FDI.
Accordingly, the previous literature includes positive and negative externalities that affects the development in emerging markets but does not outline a specific framework for sustainable FDI or specific characteristics. For this reason, the theoretical framework for this thesis uses the latter framework of four main sustainable characteristics; economic, environmental, social and governance. This framework facilitates in answering the research question as it outlines a definition of sustainable FDI in which the purpose is to enhance development in emerging markets.
5.2 Stakeholders
When examining the process of sustainable FDI, it is vital to identify the various actors that are involved and their influence on the process of such investment. Thus, this following section outlines relevant literature on stakeholder theories including the theoretical framework used for this
research. Firstly, this section accounts for the strategic management theory which uses the firm as point of reference to outline existing literature on stakeholder theory. The subsequent section, presents a theoretical framework, specifically focusing on the stakeholders involved in attracting and maintaining investment.
5.2.1 Strategic management
Stakeholders generally consist of external and internal actors, which makes it important to include all actors with a possible influence either directly or indirectly (R. Freeman, 1984). One view on a stakeholder theoretical framework has been outlined by R. Edward Freeman by arguing that the stakeholder view should be seen from the firm’s perspective as the main actor (Ibid). According to R. Edward Freeman, stakeholders are; “Any group or individual who can affect or is affected by the achievement of the firms’ objective” (Ibid, p. 25). The stakeholders tied to the firm, are the following; Local communities, organizations, owners, consumer advocates, customers, competitors, media, employees, environmentalists, suppliers and governments (Ibid).
A wide range of actors are involved and affect the actions of a firm as suppliers, customers, owners and employees change their needs which changes the demands to the firm (R. Freeman, 1984).
Similarly, the importance of the specific government’s rules and regulations set the standards for foreign competition, advocates and special interest groups which provoke reactions from media and environmentalists and vice versa (Ibid). The framework seeks to outline patterns and to map the essential actors that affect the decisions of a firm. The framework should be seen as “the stakeholder approach” in practical terms. Thus, the focus is on how executives can use the frameworks, concepts and philosophy to manage their organizations more efficiently (R. Freeman, 1984). Freeman addresses the importance of key actors to the firm as;
“1. Systems analysis to identify key actors. 2. Analysis of the power influence, and negotiating base of the firm. 3. Selection and analysis of allies and negotiation with them. 4. Analysis of political systems of opponents. 5. Formulation of offensive and defensive strategies. 6. Anticipation of resistance from opponents and negotiations with them. 7. Monitoring of results” (R. Freeman et al.
2010, p. 5).
For the company to achieve their goals, the company should carefully select which allies they will work together with and negotiate with them (R. Freeman et al. 2010). Moreover, in doing so, there is a need to analyze the political regime that the firm works within. Thereby complying the systems’
regulations but also identify which possible opponents can create challenges for the company (Ibid).
On one hand, the popularity of stakeholder theory stems from the idea that strategic management scholars have adapted to the social responsibility movement that firms should increase their awareness and social responsibility to the society they operate in (R. Freeman et al. 2010). On the other hand, popularity of this theory stems from the corporate world and is part of the result that taking various stakeholders into consideration, when operating in different economies, creates a better outcome from a societal perspective (Wright & Pruthi, 2009). In line with this reasoning, strategic management theory has developed into the view of the firm and the influencing stakeholders (Ibid). Taking the stakeholder view from the aspect of the firm, can help to enhance the resource based thinking of the firm, how to increase their competitive advantage and make the most out of their resources (Ibid). In doing so, this stakeholder based reasoning can in itself explain how a network of allies can be an asset for the firm to meet their goals and agendas (R. Freeman et al., 2010).
As stated by Edward R. Freeman; “A firm is dependent on its stakeholder network for most of the resources acquired” (R. Freeman et al. 2010, p. 35). It is therefore essential for a firm to make use of its network and various stakeholders. This theoretical framework is centered around a firm but does not provide a perspective of the host country. Additionally, it lacks an approach of how the company contributes to a sustainable development. In essence, this literature and stakeholder theory of strategic management seeks to optimize the conditions and entry strategies from a firm’s point of view. Moreover, it outlines the relevant actors when engaging in FDI but does not sufficiently reflect how the investment should be maintained. For this reason, this theoretical framework is not used as the main theory of stakeholders and actors for this research.
5.2.2 Attracting and maintaining Investment
When viewing the stakeholders of sustainable FDI, it is crucial to include perspectives of the firm and investor but also of the host countries in order to detect what the needs of the countries are.
Hence, it is not only the company that is the center of the framework. The above stakeholder approach focuses more on attracting investors to a specific country and to maintain a sustainable investment. It follows that the below theoretical framework, used for this research, seeks to outline the various actors that have an influence specifically in regard to sustainable FDI (P. Sauvant &
Mann, 2017). As stated by P. Sauvant & Mann; “Among stakeholders, it is the government who should know best how, given all relevant variables and constraints, FDI can contribute best to sustainable development. Similarly, the private sector should know best how it can contribute towards this objective” (P. Sauvant & Mann, 2017, p. 8). To clarify, the governments of the host countries should be responsible for detecting the specific needs of their country, whereas the private sector is responsible for executing the process. For this reason, the relevant actors both private and public, non-state and state actors are accounted for in the following section together with their specific influence. Each actor in this relation have specific responsibilities, influence, risks, limitations and networks they make use of when engaging in sustainable FDI (P. Sauvant & Gabor, 2019).
5.2.2.1 Host country governments
As previously stated, the host countries are the countries that are being invested in. The responsibility of the governments in the host country is to detect the needs of the host country in what type of investment they need together with how to attract an investor that can be perceived as engaging in ‘quality investments’ (P. Sauvant & Mann, 2019). This consists of host countries engaging in assessments and tests of environmental and social impact to detect which industries they want to attract and which type of investments would be beneficial for the country. Hereby also setting limitations to specific industries if the costs or potential risks exceed the benefit of the investor (P. Sauvant & Mann, 2019). Additionally, in attracting investors to a specific country, it is beneficial for the host country to make the process and procedure as transparent and convenient as possible as this can also be perceived as a way of attracting a possible investor (P. Sauvant &
Gabor, 2019).
5.2.2.2 Home country governments
The government of the home country can influence sustainable development in the sense that they can support their firms investing abroad by making codes of conduct for their companies to comply with (P. Sauvant & Mann, 2017). Additionally, home countries can set criteria for what sustainable FDI consists of, in line with the sustainable characteristics. In doing so, governments of the home country can collaborate with the private sector like investment promotion agencies and investment facilitators to develop frameworks and non-binding standards to inform and enlighten potential investors to prepare them for investment (Stephenson, M. et. al, 2020). Specific examples of these frameworks can consist of collaboration with private institutional investors, industry codes and Corporate Social Responsibility (CSR) statements.
5.2.2.3 Private investors
The role of private investors covers both the firm seeking to invest and private institutional investors that control substantial pools or funds. The aim of these funds is both to invest and seek to provide guidance to the firm (Stephenson & P. Sauvant, 2020). Furthermore, the influence and responsibility of the private investors is to make sure to have elaborate CSR policies within the company (P. Sauvant & Gabor, 2019). In this relation, the influence of the investor is to make sure that they live up to sustainability characteristics to enhance a sustainable development by providing training programs for employees, engaging in positive knowledge spillover, thus creating both economic and social impact (Ibid).
5.2.2.4 Industry associations
In the process of investment facilitation, specific industry associations, international organizations and non-governmental organization such as NGOs have an influence in creating voluntary guidelines and principles mainly to inform the investor (Stephenson, M. et al, 2020). This can also be to push for a specific agenda or in order to promote interest of specific industries and make it easier for them to comply with rules and regulations within the host country. However, the agenda of the NGOs can also be to limit any harm or potential risks that might be caused by the investment of an
MNE (P. Sauvant & Mann, 2017). Specific examples of these non-governmental organizations can be the Model Agreement on Investment for Sustainable Development by the International Institute for Sustainable Development (IISD), (IISD, 2005) or Amnesty International Human Rights Principles for Companies (Ibid).
5.2.2.5 Civil society
Civil society does in general consist of the society surrounding the firm which is the external factors and actors. The civil society is not directly influenced by the investment but are perceived as recipients of the potential spillovers and externalities in relation to the investment (P. Sauvant &
Gabor, 2019). More specifically, the civil society are the population of the host country and specific civilians that monitor particular FDI projects and business in more general terms (P. Sauvant &
Mann, 2017). According to the World Economic Forum, civil society is; ”a wide array of organizations; community groups, non-governmental organizations, NGOs, labor unions, indigenous groups, charitable organization, faith-based organizations, professional associations, and foundations” (World Economic Forum, 2018). Yet, using the framework of Karl P. Sauvant &
Howard Mann, civil society acts as a ‘third party’ actor meaning that it is the actors beyond governmental actors and private investors (P. Sauvant & Mann, 2017).
5.2.2.6 International- and intergovernmental organizations
The role of IGOs is to develop non-binding intergovernmental instruments. As an example, these actors can be characterized as United Nations (UN) and underlying bodies, but are far from limited to organizations related to the UN (P. Sauvant & Mann, 2017). Examples of these instruments are guiding principles on business and human rights which are endorsed by the UN Human Rights Council. Similarly, the International Labor Organization (ILO), mainly consisting of a Declaration of Principles Concerning Multinational Enterprises and Social Policy. Examples from World Trade Organization can be seen in the working groups, JSI and committees regarding IFD (JSI for FDI) (P.
Sauvant & Mann, 2017). Likewise, international organizations such as the Organization for Economic Cooperation and Development (OECD) create guidelines for Multinational Enterprises which is developed primarily by home country governments (Gestrin & Novik, 2017). This can also be found
in organizations such as United Nations Conference on Trade and Development (UNCTAD) that creates Investment Policy Frameworks for Sustainable Development (P. Sauvant & Mann, 2017).
5.2.3 Summary of stakeholders
The above section outlines a framework and accounts for relevant literature regarding actors and stakeholders for the firm and investors in FDI. Thus, the strategic management approach outlines the relevant actors but solely from the point of view of the firm and not the host country or other relevant stakeholders. On the contrary, the theoretical framework on attracting and maintaining investment identifies actors both in relation to attracting investors and the stakeholders involved in maintaining investments. These actors are identified as; host country governments, home country governments, private investors, industry associations, civil society, and intergovernmental- and international organizations. It is therefore used as the main theoretical framework for stakeholders in this research.
5.3 Orchestration
The above-mentioned theoretical framework of stakeholders touches upon the responsibilities and functions of actors, but lacks a description of the instruments and means used by the actors. For this reason, the below section acts as a supplementary theoretical framework to identify not only who but how actors such as international organizations and IGOs can engage in orchestration.
Orchestration can be defined as a specific mode of governance which is increasingly used by IGOs to reach their governance goals. IGOs act as orchestrators when they try to facilitate or coordinate the governance activities of intermediaries through persuasion and inducement (LMU, 2021). It is important to note that this theoretical framework of orchestration is not substitutional but rather supplementary to the theoretical framework of stakeholders. As this research seeks to investigate how the WTO can facilitate in attracting and maintaining sustainable FDI for development in emerging markets, it is important to include literature on the specific role and instruments used by IGOs. Thus, this section identifies state and non-state actors and the instruments and means they use as orchestrators (Levy et al., 2017).
Orchestrator Intermediator Target 5.3.1 The O-I-T model
The ways in which orchestrators exercise their strategies is described as the O-I-T model (Orchestrator - Intermediary - Target), as illustrated in the table below (Table 2). The Orchestrator is, in this relation, the IGO. The intermediator is the non-state actors and the target is typically states or private entities (Abbott et al., 2014, p. 3).
Table 2, The O - I - T model (Inspired by Abbott et al., 2014)
Engaging in orchestration and the O-I-T model is mainly build upon two hypothesis; The first hypothesis claims that; “governance actors are more likely to orchestrate when they lack certain capabilities needed to achieve their goals through other governance modes” (Abbott et al, 2014 p.
25).The other main hypothesis regarding IGOs claim; “Intergovernmental organizations are more likely to orchestrate when there is a divergence among their member states, and/or between member states and the intergovernmental organization” (Abbott et al., 2014 p. 34).
To clarify, IGOs engage in orchestration if they have limitations and challenges to meet their agendas, which leads to four main assumptions about orchestration; firstly, orchestration consists of both hard, direct, soft and indirect means of power which means that IGOs can make use of both hard and soft regulation (Abbott et al., 2014). Secondly, there is an assumption of being goal seeking. This means that the orchestrator and intermediator engage in orchestration to collectively reach a common goal. These goals can vary from being material or ideational, utilitarian, logic or socially constructed, self-seeking or altruistic (Abbott et al., 2014).
Thirdly, the engagement in orchestration stems from a ‘complementary capabilities assumption’
meaning that the orchestrator “Enlists intermediaries because it lacks certain capabilities for hard, direct governance; the orchestrator may have insufficient regulatory competences, operational capacity or legitimating authority to unilaterally achieve its objectives” (Abbott et al., 2014, p. 21).
The line of reasoning is that the IGO enlists intermediaries that can fill the gaps and lack of knowledge in the specific area. In return, the intermediaries can get support from the IGO in the
intermediary is of the same interest and want to push for the same agenda as the orchestrator (Abbott et al., 2014).
Lastly, related to the second and third assumption, it is likely that the intermediary seeks to meet the same goals as the orchestrator. This is the ‘correlated goals assumption’. Thus, “The intermediary’s voluntary cooperation is based on correlated goals; its basic goals are aligned, or at least compatible” (Abbott et al, 2014, p. 22). However, this does not directly mean that there is a
‘O-I’ harmony or that the orchestrator and intermediary agree entirely on the topic. On the contrary, clashes or controversies may arise due to different priorities or ways of pursuing organizational self- interest (Ibid).
5.3.2 State and non-state actors
Having outlined the O-I-T model and assumptions of orchestration, this following section identifies the difference between the actors engaging in orchestration; the non-state and state actors. The primary function of non-state actors is primarily to facilitate in monitoring, act as judges or facilitators and engage as community builders (Levy et al, 2017). What is common for non-state actors is that they perform a variety of roles linked to roles in regulatory governance and can perform multiple roles at the same time or change over time (Ibid). An increasing portion of business regulation is not formed by international state institutions but an array of non-state actors such as NGO’s, social movements, professions and multi- stakeholder initiatives (Bernstein & Cashore, 2007).
NGOs typically work within an area of their interest often within social or environmental issues and independently of the government. They typically guard their independence and monitor target behavior in order to shape international business (Levy et al, 2017). Social movements do often consist of civil society formed of people with shared values within a given topic. These either collectively go against the government to create awareness on a given topic or collaborate with the government to act and help achieve their goals (Ibid). Professions such as auditing firms or credit rating agencies do often not act because of the issue at hand but rather for economic incentives (Ibid). Multi-stakeholder initiatives are often referred to as a governance structure in which multiple stakeholders come together and gain influence on decision making and processes within their field.
Multi-stakeholder organizations will often consist of targets for specific regulators which can be perceived as a strategy of embedding the targets in regulatory operations (Levy et al., 2017).
State actors are typically referred to as governing bodies that have direct impact to develop rules, regulation and adapt laws (Hale & Roger. 2013). Examples of these governing bodies are national governments and regulators such as the EU Commission, IGOs i.e. under UN (Ibid). The literature on orchestration “adds to the large literature assessing whether IGOs such as the UN, The World Trade Organization (WTO) or International Monetary Fund (IMF) make independent contributions to global governance” (Abbott et al, 2014 p. 7). An argument for IGOs to engage in orchestration is in this relation that “IGOs are tightly controlled by states and largely incapable of independent action (Abbott et al, 2014 p. 7). Thus, IGOs seek ideational and material support from non-state actors such as private actors, promotion agencies and various non-state actors (Abbott et al, 2014). Having said that, as stated by Abbott et al. “State actors still attempt to pursue traditional modes of governance, such as making, monitoring and adjusting international law (which we refer to as hierarchy)” (Abbott et al, 2014 p. 3). This is primarily done through hard and direct regulation which is elaborated upon below.
5.3.3 Hard and soft regulations
The instruments used in orchestration to exercise power and create influence depends on whether the orchestrator is an IGO or NGO, or put in another way; state or non-state actors (Abbott et al., 2014). These instruments are distinguished between hard, soft, direct and indirect as illustrated in the table below (table 3). It is important to note that hard rules can also be exercised indirectly as well as soft rules being exercised directly, as illustrated by the arrows in the table.
Table 3, Instruments of regulation, (Inspired by Levy et al., 2017)
As stated above, IGOs seek a hierarchical approach in which they use hard instruments and regulations. State actors do to a great extent use the means of hard regulation which means that they most commonly exercise direct power over national governments, countries and businesses to maintain and govern international law. An example of hard regulation is often a legally binding rule which is adopted by a national regulatory agency and used to govern business firms (Abbott et al., 2014). As stated in the table above, these regulations do typically consist of standards, formal rules, certification and sanctions in the case on non-compliance (Levy et al., 2017). On the contrary, soft rules consist of voluntary guidelines, frameworks, no formal rules and weak or no sanctions in the case of non-compliance (Ibid). Nevertheless, state actors do not always have direct access and insights to industries, business and processes. Therefore, state actors are more likely to seek collaboration with non-state actors when they lack capabilities to achieve their goals (Abbott et al., 2014).
Non-state actors are crucial in this process as they possess knowledge such as technical expertise, local information, material resources and often direct access to targets, which IGOs lack (Abbott et al., 2014). Hence, non-state actors use soft instruments to create influence. Furthermore, there is a possibility of hard and indirect instruments as well as soft and direct influence (Ibid). This distinction is showed in the relationship between the IGO and the intermediary. If the IGO delegates responsibility to the non-state actor, the instrument will typically be hard but indirect, as the non- state actor is granted responsibility for the target but does not have power to exercise it directly (Ibid). If the IGO and non-state actor engage in collaboration, the instrument is more likely to become soft but direct as the IGO makes use of soft instruments inspired by the non-state actors but try to exercise the instruments directly over the target (Ibid).
5.3.4 Summary of orchestration
To summarize, the theory of orchestration does not substitute the theoretical framework of shareholders. On the contrary, this literature adds the element of identifying which means and measurements state and non-state actors use through orchestration. Additionally, it outlines the difference between these actors. The theory of orchestration outlines the O-I-T model in which the orchestrator, intermediator and target is described. Hence, orchestrators and in particular IGOs can make use of hard, soft, direct and indirect instruments to orchestrate. As a result, the above
literature facilitates in providing a theoretical framework that depicts the instruments used by the relevant actors and stakeholders.
6. Method
The following section addresses the methodology of this research. The structure of the methodology is inspired by the structure and line of reasoning of Mark Saunders’ research onion developed in 2007 (Saunders, 2007). The research onion displays six levels of study and the approach towards conducting a research, as illustrated in table 4.
Table 4, Illustration of Research Onion (Inspired by Mark Saunders, 2007)
The first level consists of the philosophy of science, the ontology and epistemology (Saunders, 2007). The philosophy of science is the so-called set of beliefs that the research is built upon (Ibid).
The ontology refers to; “The study of being. Our basic assumptions about the nature of the world and the beings that exist in it” (Egholm, 2014 p. 221). Epistemology refers to; “The cognition and knowledge. Epistemology is about the nature of knowledge, how we can know, and how knowledge can and should be produced” (Ibid p. 219). The second layer of the research onion consists of the research approach, whether it is a qualitative or quantitative study and whether there is and inductive, deductive or retroductive approach (Saunders, 2007). The third section goes into depth with the research strategy. This section presents the choice of strategy, where in this relation, an intrinsic case study is used to answer the research question (Stake, 2000). The fourth layer i includes the research design. This means the data collection, sampling strategy, choice of interviewees and interview guide (Steinar Kvale & Svend Brinkmann, 2015). The fifth layer of the onion considers
1.Philosophy of Science 2.Research Approach 3.Research Strategy 4.Research Design 5.Ethical Considerations 6.Techniques and Procedures
