Hanson, Mark (2008). Economic Development, Education, and Transnational Corporations. Reviewed by James Jackson, University of Illinois at Urbana-Champaign

Hanson, Mark (2008). Economic Development, Education, and Transnational Corporations. NY: Routledge Pp. 192         ISBN 978-0-415-77116-0 Reviewed by James Jackson University of Illinois at Urbana-Champaign June 3, 2009 In his book Economic Development, Education, and Transnational Corporations, Mark Hanson describes the different paths taken toward economic development by South Korea and Mexico over the past five decades. Hanson uses these case study examples to develop his theory of how the economic development of less developed countries (LDCs) is tied to both the increasing the level of educational attainment of the local population and the presence of transnational corporations (TNCs) seeking comparative advantage through trade. Contrasting the strategies employed by the South Korean and Mexican governments from the 1960’s to the present helps illustrate that key differences in national policy can lead to radically different outcomes during key stages of the development process of economic developing nations. Throughout the pages of Economic Development, Education, and Transnational Corporations, Mark Hanson presents his arguments in a manner that is addressed toward education, development economics, and international business researchers and practitioners. By combining theory from these three fields, Hanson formulates a coherent theory of how economic development strategies can be designed and successfully implement by LDC governments. The book also highlights strategies that should be avoided, including those related to deficiencies in planning and failures in implementation. Through the comparison and analysis of Organization for Economic Cooperation and Development (OECD) data, diagrams and graphs, and explanations of gaps in education policy, development economics, and international business literatures, Hanson lays the groundwork for successful economic development strategies. The author’s work is not designed to be a critique of the different development strategies employed of South Korea and Mexico. Rather, by clearly explaining the stages of economic development process and the potential role of the transnational corporations, the author demonstrates the benefits of combining improvements in educational attainment and increasing participation in internal trade to the economic development of LDCs. In the first chapter, “Knowledge Transfer and National Development”, Hanson explains how the process of globalization that has occurred in recent decades is a response to the presence of economic comparative advantage between relatively wealthy developed economies and less developed countries of the world. During this process, the developed economies have sought relatively cheap labor and resources to fuel their respective economic advancement. This globalization process was enabled by, and contributed to, the rise of the transnational corporation. One of the key points that Hanson brings to light about the globalization process is that the presence of the transnational corporations in LDCs resulted in these corporations filling an educational void that was present at the time of their arrival. On a microeconomic level, knowledge has been transferred from the employees of the transnational corporations to the local population, as former TNC employees moved through the economy from firm to firm carrying knowledge first acquired while employed at transnational corporations. In “Stages of National Development”, Hanson makes a contribution to the literature by clearly enumerating, defining, and explaining that economic development is a long-term process, which can be organized into four distinct stages. During any of these stages, the successful economic development can be short-circuited if erroneous national policies and strategies are implemented (p. 16). The author identifies specific methods that should be followed in order for certain benchmarks in the development process to be reached by LDCs. Further, Hanson explains how South Korea was able to meet the benchmarks along the path to successful development during the 1960’s and 1970’s, while in contrast Mexico failed to meet the same benchmarks and thereby reach a similar level of success during this same time period. In chapter three, “National Strategies of Knowledge Acquisition and Integration”, Hanson explains the important macro-level role that the South Korean and Mexican governments played in the development process. The author reports that the South Korean government chose an active, integrated development strategy designed to attract transnational corporations by collaborating with transnational corporations in a business friendly environment. It is likely that South Korea successfully advanced through the development stages, because South Korea chose to implement an integrated development strategy with the goal of knowledge transfer, while Mexico pursued a less successful strategy with the apparent goal of wealth building. In contrast, the Mexican government developed an environment attractive to transnational corporations, but was unable to take full advantage of the knowledge transfer process that can occur when transnational corporations offshore manufacturing facilities to LDCs. Instead, as illustrated through trade agreements such as the North American Free Trade Agreement (NAFTA), it would appear that Mexico continues to seek the wealth-building benefits of the presence of transnational corporations, but not necessarily the full knowledge transfer benefits of trade (pp. 116 –117). Chapter four, “Educational Reform and National Development”, continues the discussion of the national policy role in the development process by reviewing and analyzing the education strategies implemented by the two nations. South Korea developed a comprehensive education strategy and corresponding policies, while Mexico lacked implementation of educational reform policies during the 1960s. Hanson contrasts the progress each nation made in the area of educational improvement from the 1960’s to the present by measuring the impact of reforms on levels of wealth, changes in curriculum, collaboration efforts with the transnational corporations, and vocational training of the local population (p. 17). The author’s analysis of OECD data implies that the successful implementation of education reform by the South Korean government increased international rankings that now rivals the educational systems of Japan and Singapore, while the Mexican education system trails far behind the top-rated systems of the developed world (pp. 78 – 80, 92, 97). Finally, in chapter five, “Conclusions, Analysis and Lessons Learned”, Mark Hanson acknowledges that there is a great body of work that addresses the economic development process from the standpoint of education, international business, and development economics. However, the author argues that the literature in these fields is lacking in not having addressed the key role that transnational corporations can play in “transferring manufacturing knowledge from the industrialized nations to the poor nations of the world” (p. 17). According to Hanson, the globalization process of the last five decades has led to an acceleration of the transfer of manufacturing knowledge to LDCs and has thereby benefited developing nations that embraced the process early, successfully proceeded through the four stages of development, and succeeded in achieving increased and sustainable levels of economic production and development. The key to the knowledge transfer process is that LDCs must be able to diffuse manufacturing knowledge into the local economy, and the managers of local operations must accept and employ the new processes in local production firms. In addition, nation states must implement education improvement strategies that seek to not only develop technical training of employees, but also develop collaboration between higher education institutions and research and development managers of transnational corporations. Further, the national education reform strategy must include the improvement of the primary and secondary educational systems that feed into the local higher education system (pp. 115 – 116). Through the chapters of Economic Development, Education, and Transnational Corporations, Mark Hanson illustrates the case studies of the comparative economic development processes of South Korea and Mexico in an eminently readable fashion. The author contributes to the literature not by critiquing the respective development strategies pursued by the two countries, but rather by demonstrating the necessity of a two-fold process: improving education and increasing international trade through the presence of transnational corporations. Further, Hanson’s argument that seeking knowledge transfer and not simply wealth transfer from the presence of transnational corporations is a key point that likely explains the difference in the economic development levels of developing countries in general, and South Korea and Mexico in particular. In the present era of debate over the costs and benefits of globalization, Mark Hanson’s thesis illustrates the author’s clear understanding of the issues and complexities of the stages of the economic development process. The author’s ability to clearly illustrate and explain the interdependent roles of education and the transnational corporations demonstrates that his work will likely contribute to a better understanding of how the indirect pursuit of knowledge through comparative advantage can lead directly to the building of national wealth and increased economic welfare of economically developing nations. Hanson’s ability to communicate the key elements and linkages in the globalization process makes Economic Development, Education, and Transnational Corporations a recommended study for those seeking to better understand the present and future state of the world in which we live. About the Reviewer James Jackson, PhD. is a Lecturer of Finance at the University of Illinois at Urbana-Champaign.