Managing International Trade and Investment

Course Number 1166

Professor of Management Practice Dante Roscini
Fall; Q1Q2; 3 credits
25 Sessions
Paper
  Assistant Professor Meg Rithmire
Spring; Q3Q4; 3 credits
28 Sessions
Exam

Career Focus

This course is intended for anyone that will work in a company that has international assets and operations or that invests transnationally. It is designed for those who are likely to engage directly or indirectly in trade, minority or majority investments, acquisitions or partnerships across national borders and want to acquire tools to best interpret the unfamiliar landscape they might face. It is also relevant for students who expect their careers to involve investing in financial assets and want to explore the relationship between macroeconomic developments and the financial markets.

Educational Objectives

Markets and industries can vary dramatically between nations and, increasingly, political and economic events across the globe shape the issues faced by managers and investors in a vast array of industries. This course is about how to recognize and analyze the risks and opportunities inherent in doing business or investing abroad. For many high-level managers and investors, understanding the global macro issues - and the related politics - is what will make the difference between success and failure.

Doing business across borders entails a whole new set of managerial challenges and opportunities: reassessing competitive advantage; evaluating diverse political environments and legal structures; considering the impact of different policies and regulations; assessing currency, macro and other financial risks; considering trade regimes; as well as understanding widely disparate cultures and business norms.

MITI's framework of analysis is based on a systematic evaluation of the informal and formal rules that define the markets for goods, services, and capital. A broad range of real life situations in a wide variety of contexts is analyzed through company cases that are seen through the eyes of managers and investors rather than those of policymakers.

Course Content

After a high level examination of what it means for firms to be participants in the global economy, the course will develop into three main modules.

The first module focuses on International Trade and in particular on the politics and the rules associated with it. We explore how local and global politics influence trade developments and the role that formal institutions, such as the WTO, as well as informal institutions, play in shaping the rules that govern exporting and importing among nations. We will also look at the impact of the rise of regional trade agreements and in particular the potential consequences of the "super-RTAs" currently under negotiation among some of the world's economic powers.

The second module concentrates on Foreign Direct Investment. FDI captures a very wide spectrum of activities by firms that look to expand internationally. These might include minority and majority investments, Greenfield or Brownfield investments, purely private or public/private ventures, acquisitions or partnerships and joint ventures. By looking at successes and failures in an assortment of industries and geographies, we will examine the complexities of making such decisions in a cross border context and how to predict and navigate key factors such as evolving national and international regulations, local and global political agendas, government relations and economic and financial developments but also how to take into account the social and cultural aspects of the target markets. If possible, case protagonists come to class.

The third module investigates Portfolio Investment. In a world where capital moves quickly and financial markets across asset classes and jurisdictions are ever more interconnected, investing internationally must account for the potential evolution of the macro scenario. Major opportunities or disappointments can result from understanding or failing to understand the consequences of monetary and fiscal policy decisions or the change in macroeconomic variables. In several of this module's sessions we will avail ourselves of selected senior guest speakers from the world of international finance that will share their views on macro investing and discuss the most current financial market developments. Past guests have included the Chief Strategist of JP Morgan Asset Management, the Chief Economist of GE, the Chief Economist of PIMCO, the CIO of Omega Advisors and the Head of European Economics Research at Goldman Sachs.

 

Career Focus

This course should interest any student who plans to work for a firm with transnational interests or investments or students with significant interests in the global and domestic politics that affect trade and capital flows.

Educational Objectives

The present wave of globalization, which began roughly in the early 1980s, has transformed global supply chains, rewritten the rules of global finance, contributed to the movement of hundreds of millions of people out of poverty, and generated new axes of inequality and social division. Yet even firms with the most sophisticated international strategies are exposed to changes in macroeconomic conditions and, as has become abundantly clear with the U.K.’s vote to leave the European Union and the rise of protectionist politics in the US and beyond, changes in political commitments to globalization.

The course aims to equip students with a deeper understanding of globalization and international business by focusing on three broad themes. First, we will consider the variety of domestic institutions and the relationships between institutions, markets, and competitive advantage. We will consider how various organizations of labor markets, financial markets, and regulatory regimes, for example, create opportunities and barriers for multinational firms. Second, we will focus on the more informal domestic “rules” that shape international openness and, therefore, the strategic environment for transnational business. These informal rules and bargains include the political coalitions that sustain globalization and the dynamics of international business in different contexts of economic and political inequalities. Lastly, we will consider transnational firms as political actors, creating and shaping domestic and international politics rather than simply reacting to the decisions of policy-makers.

Course Content

The course will be divided into three modules.


The first covers the multilateral and domestic institutional contexts for international trade and capital flows. The cases present firms managing uncertainty and risk in long-term investments, especially during moments of change in the architecture of globalization. The cases will allow us to consider how firms succeed and fail by understanding, or failing to understand, the political and social arrangements, in addition to economic conditions, that surround international openness. We will also consider the fragility of globalization itself by emphasizing openness to trade and capital flows as political choices that are subject to change. The second module looks at varieties of capitalisms, meaning the profound differences in market organization in different countries and regions. We will focus on cases in which an understanding of domestic rules, formal and informal, creates opportunities and constraints for transnational firms. The last module will focus on firms as political actors, writing the rules of globalization in their interactions with governments and international institutions.


In all modules, a particular focus of the course will be on the rules of globalization in the developing world, looking not only at western companies investing in emerging markets but also at the growing phenomenon of firms from developing countries, such as China, “going out.” Through this emphasis and that on the fragility of globalization, we will consider throughout the semester whether the wave of globalization that began in the 1980s is unraveling and why or why not.