Foreign Branches vs. National Interests

Abstract

Sizeable sector of foreign-owned entities has emerged in Russia, comprising branches, daughter companies and majority-owned companies of foreign investors. The focus of regulator’s and researcher’s attention should be moved from the extent to which FDI are to be admitted / attracted to Russia to the analysis of whether the format of the already existing foreign-owned entities is the desired one. Globalization leads to differentiation of branches and daughter companies of multinational corporations. People, plants, business lines and even corporate head offices have become transferable from one country to another. This process is greatly intensifying the international competition for the share in the value chain attributable to individual countries. Russia, being the huge market, is in a position to demand a substantial degree of localization from international companies seeking to enter the country. The regulator’s approach towards those potential entrants should be dependent upon their readiness to allocate to Russia a considerable part of the company’s value chain. It is proposed to use corporate governance mechanisms as an instrument to promote national economic interests.