Economics and Law of Artificial Intelligence: Finance, Economic Impacts, Risk Management and Governance

By Georgios I. Zekos

This book presents a comprehensive analysis of the alterations and problems caused by new technologies in all fields of the global digital economy. The impact of artificial intelligence (AI) not only on law but also on economics is examined. 
In the first part, the economics of AI are explored, including topics such as e-globalization and digital economy, corporate governance, risk management, and risk development, followed by a quantitative econometric analysis which utilizes regressions stipulating the scale of the impact. In the second part, the author presents the law of AI, covering topics such as the law of electronic technology, legal issues, AI and intellectual property rights, and legalizing AI. Case studies from different countries are presented, as well as a specific analysis of international law and common law. 
This book is a must-read for scholars and students of law, economics, and business, as well as policy-makers and practitioners, interested in a better understanding of legal and economic aspects and issues of AI and how to deal with them. 

• Language: English
• Publisher: Springer
• Release date: Jan 11, 2021
• ISBN: 9783030642549

Book preview

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021

G. I. ZekosEconomics and Law of Artificial Intelligencehttps://doi.org/10.1007/978-3-030-64254-9_1

1. Introduction

Georgios I. Zekos¹  

(1)

International Hellenic University, Serres, Greece

Artificial intelligence is becoming global and so, it is encompassing various industries and transforming commerce, which means that AI is having tremendous economic consequences akin to transformational technologies of the past, such as electrification, manufacturing, and information technology. It could be said that artificial intelligence (AI) encompasses the development of computers able to engage in human-like thought processes such as learning, reasoning, and self-correction.¹ It is worth noting that the term artificial intelligence suggests equivalence with human intelligence. In other words, AI can be seen as the replacement of human brain and activity by machines’ thinking and activity, which is currently human made, and we have not arrived to the point where machines can generate their own intelligence. Machine learning is a subset of AI that utilizes statistical, data-based methods to progressively expand the performance of computers on a given task, without humans reprogramming the computer system to achieve enhanced performance. First of all, AI can reproduce physical human processes through machines, making routine tasks more competent, such as attaching the front bumper of a car in an assembly line. Moreover, AI can also make possible large-scale automation of entire groups of tasks, including repetitive intellectual tasks previously performed by human beings and so, it seems that more than just mimicking the physical aspects of humans, AI simulates and exceeds human mental processes.² Drones, robots, genetic engineering, self-driving, autonomous vehicles, and renewable energy are technological advancements the globe has seen lately.

AI has transformed the human population in terms of technology, leading to the rise of new devices and tools that are vital in doing business, education, and communication such as machine learning, deep learning, biometrics identification, speech recognition, and natural language generation (NLG). All these technologies advance human interaction with machines to facilitate most operations such as biometric identification uses many devices to improve the security of data. It has to be taken into account that the right of freedom of expression and the right of freedom of science cannot be restricted.

It is worth noting that algorithmic decisions influence everyone, often without their knowledge. Algorithmic decision-making presents multiple benefits to society and so, algorithms surpass human abilities, and the set of those tasks is escalating. The algorithm engages in its own feature selection, adding layers of features that are used to map real-world data to a specific outcome and so, amending the weight given to each neuron and type of information, which means that deep learning does not entail a data scientist to interfere where its predictions are insufficient and so, the neural network will make decisions. It seems that presently algorithms are never entirely autonomous and so, any decision-making algorithm necessitates a human to decide the desired output under a conditional probability.

It has to be taken into consideration that algorithmic development happens more swiftly than past innovation cycles to some extent for the reason that the software on which AI runs is developed, erased, and reconstructed with rather fewer investments in physical infrastructure and resources. Are there cons concerning AI technology? It is worth noting that a defective algorithm results in the failure to the accomplishment of aims and ending up being positively destructive. Moreover, AI assembles information from cyberspace that reproduces bogus data and since the information is contaminated, the algorithm will be unable to distinguish among good and bad information. Furthermore, AI is a software can be hacked, pirated, or get corrupted. Additionally, AI has an opacity problem, and an increase in complexity makes the AI opaque named as a black box, indicating the inability of human beings to understand what the machines are doing when they are teaching themselves that is improvising itself without any human interference.

AI and machine learning focused on the generation of mechanisms not only for the management and integrity of data but also for its marketization. It has to be taken into account that the purpose of AI is to filter the noise, find meaning, and act upon it, finally with greater precision and better outcomes than humans reach on their own. The evolving intelligence of machines is a powerful tool to solve problems and to generate new ones and so, improvements in AI herald not just a new age in computing, but also present new threats to social values and constitutional rights.

It is worth noting that AI-based technologies gradually penetrate areas such as transportation, health, education, justice, news and entertainment, and commerce underlining the significance of the context for which AI systems are developed and in which they are embedded. Maybe the central attribute of many AI systems is the changeable degrees to which they influence human autonomy and shift it away from human beings toward machines, with actually deep effects also for concepts such as the profession and professionalism. It is worth mentioning here that AI implementation demands both the ability to adapt public infrastructure to fit AI innovations and a private sector commercializing AI into viable goods.

Blockchain technology is transformative for every human practice that utilizes recordkeeping. If blockchain technology accomplishes even a small part of its anticipated prospective, then soon it will replace many critical infrastructures within societies, from property records to payment and voting systems. Moreover, if blockchain technology ends up enabling our most fundamental social infrastructures, then the governance processes for generating, upholding, and changing the technology must be examined carefully as they will influence the resilience of the technology, along with any infrastructure that comes to rely on it.³

Furthermore, when it comes to technological revolution, governments have historically been wary and so, China at first resisted technological transformation owing to its prospective to activate social change. Afterwards the state utilized technology to its advantage and so, China has become a key actor in technology generally and AI specifically.⁴ It has to be taken into account that AI in the wrong hands is very dangerous and the UK and US governments have not involved in shaping or controlling AI for the democratic public good, instead leaving it to be molded and controlled by a small group of tech company controllers, in their own interests. Furthermore, it seems that autocratic models of governance stemming from the US and China dominate the advancement of AI globally.⁵

Due to their superior performance in data gathering and processing, big data analytics, AI, and machine learning are supposed to influence all operational, as well as internal control matters, from strategy setting to risk management and compliance. It has to be taken into account that while humans have core data at their disposal and dynamically use only these data for decisions, technology take into account not only core but also apparently unrelated data.

Technology is said to be unbiased, notwithstanding in the limited sense that technology does not follow its own agenda and is not itself subject to humans’ cognitive biases. It could be said that machines neutralize the groupthink and the strong social pressure against the expression of dissent in boardrooms. Hence, it is worth noting the likelihood of imposing the risks linked with blockchain’s service on the platform operator. Taking into account that only the blockchain platform operator is able to translate risk into cost, there is a need for a blockchain platform operator to be insured, which means that if blockchain transactions or smart contracts are destined to grow in the future, the greatness of the risk will proportionately augment.⁶

It is argued that shareholders will no longer need boards to make sure that managers do not deviate from the strategies and policies that maximize shareholder value, for the reason that shareholders will be able to do the supervising themselves and so, there will be no essential for boards to mediate between the corporation and its management on the one hand, and shareholders on the other. Are people prepared for the challenges presented by tech developments? Will people be replaced, partially or fully, by AI?

It has to be taken into account that the technologies of the Fourth Industrial Revolution confront international governance and cooperation due to the fact that there is no institutional focal point for technology governance in the international system, just as there is not an integrated focal point for such policy in national governments. In addition, corporate governance is about management decision-making, and so, it is inevitable that social norms, national culture, and structures play a central role, which varies from nation to nation.

While the world economy is global, law, regulation, politics, and society are still largely national, only gradually emerging from bounds forced by the modern international or Westphalian states system. Moreover, globalization and the revolution in information technology have altered the economic and political meaning of space and so, borders are transcended rather than crossed, relations become progressively supraterritorial as distance, borders, and geographic space itself lose economic and political importance.

The term governance designates all regulations intended for organization and centralization of human societies on a global scale. Moreover, governance conveys formal political institutions coordinating and controlling independent social relations having the capacity to enforce, by force, their decisions. Which the capacity of enforcement is and by whom global economic governance is imposed in economic globalization? Globalization is requesting for new kinds of governance such as governance without government, at least without state governments in their traditional capacities as new institutions are formed or strengthened. The new kinds of governance often raise critical questions of legitimacy. Globalization creates a larger space that of global space challenging the current capacity of the legal formations such as international law, courts, and arbitration. One consequence of globalization is that on an international level, nation-states have gradually more to function through the mode of horizontal power.

The corporate governance focuses on the internal structure, rules, and procedures of the board of directors. Good governance implies that the corporation is functioning for the optimal benefit of the stakeholders involved and so, adoption of better corporate governance practices offers the long-term stability and growth to the corporation, which means that it facilitates in building the confidence among the stakeholders along with prospective stakeholders. Investors are paying higher price to the corporations whom adhere the international governance norms. Moreover, effective corporate governance lessens the perceived risks, therefore reducing the capital cost and aids the Board of Directors to take quick and better decisions. The application of principles of corporate governance increases engagement and long-term relations of the stakeholders avoiding mismanagement and refining the method of capital use giving support in diminishing the level of risk in the organization through nonstop involvement in creative practices.

Enterprise risk management (ERM) is decisive for firms functioning in the global industry in order to accomplish their highest long-run expected values. ERM manages the risk across all parts of the organization so that, at any given time, it gains just the optimal risk taking in order to engage in strategic objectives.⁷ The management of corporations organizes the efforts of individuals in order to achieve aims and objectives using available resources resourcefully and efficiently.⁸ Management is not merely the handling of a mechanism. Moreover, management has as its leading purpose the satisfaction of a range of stakeholders. In most models of management and governance, shareholders vote for the board of directors, and the board then employs senior management.

Asset pricing, portfolio maximization, and risk management have always been the central focuses in the banks, insurance firms, and personal investment. Risk management is the processes via which management identifies, analyzes, and reacts properly to risks affecting the organization’s business objectives. The answer to risks typically depends on their perceived gravity and implicates controlling, avoiding, accepting, or transferring them to a third party. However, organizations manage a wide range of risks such as technological risks, commercial/financial risks, information security risks, etc.

Furthermore, risk management is the identification, assessment, and prioritization of risks followed by corresponding and efficient use of resources to diminish, supervise, and control the likelihood and/or influence of adverse events or to exploit the upcoming chances.⁹ Moreover, risk management is a two-step course: firstly, uncovering what risks exist in an investment and secondly dealing with those risks in a way best-suited to a corporation’s investment objectives. It is worth mentioning that while the twentieth century is considered the epoch of management, the twenty-first century is expected to be more focused on governance and e-governance. Moreover, both terms tackle control of enterprises but governance includes always an assessment of underlying rationale and legality.

Globalization brought new global governance mechanisms to which civil society and private actors, along with governments, contribute knowledge and capital. The global governance mechanisms consist of networks of private and public actors relying on voluntary action and having only weak enforcement measures.¹⁰ Corporate governance is, to a great extent, a set of means through which outside investors protect themselves against expropriation by the insiders. Information problems and managerial incentives naturally restrict the efficiency of corporate governance in public corporations.¹¹ Effective corporate governance restricts managerial self-interest and protects shareholder interests managing the interests of multiple stakeholders and so, settling the conflicts of interest between shareholders and noninvesting stakeholders.

MNEs are driving the globalization process and the largest and the most powerful belong to the most advanced industrialized countries. The sustainability of corporate growth requires a national government support, ever declining trade barriers, free flow of capital, a viable and favorable legal, economic, financial and technological environment, and host governments friendlier to market-driven economies. Moreover, the leaders of MNEs are antagonizing to get a clear view on their future expansion and to build their potential world market domination and so, often they avoid and/or exceed the economic, legal, and political traditional structures, which means that they consider themselves as the eventual agent of revolution and the ultimate driver of the global economy. In addition, the leaders believe that government policy should be regarded as a way for achieving their eventual economic interest. Do market forces determine which technology will be used? Is it the technology that is used which dictates that the market must be molded to fit technology’s requirements? Nowadays, companies can transfer advanced technology to countries with low labor costs, and concurrently exploit the advantages of cheap capital in capital-rich countries. As a consequence of enhanced global mobility, a new capitalist world economy has emerged, and key feature is a massive migration of capital from the industrialized countries to low-cost production sites in the third world. The cause of the globalization of production is market forces and property rights. The advent of mass production technology brings with it the desire and the need to manage the market and to stabilize demand.¹² Multinational enterprises play vital role in promoting and shaping the patterns of economic development, and this responsibility is affected by means of their foreign direct investment decisions. MNEs are required to assess the requests of international integration of production within the enterprise, with that of the need to respond to local surroundings. Moreover, MNEs operate to capitalize on the production of income and access to the capital markets. Will AI replace MNEs or MNEs will utilize AI in order to impose its terms globally without any control?

It is characteristic that markets no longer need to be defined in terms of geographic proximity and, in some contexts, the location of transactions and organizations has become indeterminate. It seems that technology repairs imperfections, augments effectiveness, diminishes costs, increases predictability, and offers celerity. It has to be taken into account that from a legal viewpoint, AI has already begun to question fundamental notions underlying how and why we incentivize creation and innovation.¹³

AI and its usage have significant impact on human lives and society as a whole. Moreover, AI and its nature resemble the well-known field of software engineering and software as itself and so, AI technology entails the implementation of software to be functional, which means that AI has to be copyrighted or patented as software based on its character.¹⁴ Moreover, AI is creating machines that can think and work like the human brain. Engineers are crafting robots that help in the manufacturing, assembling, and commercial industries. The robots offer information and work by assembling products using AI and programming has a significant application in artificial intelligence since these machines use computer programs to deliver information and do different actions. AI has disadvantages affecting the globe. Has AI become useful to the human community? Will AI affect the future human society? Can law deal with AI disruptive technologies? Will AI replace the law by technology? How humans and AI work together? Under what circumstances the human or the AI should have formal decision-making authority? Which is the impact of AI upon society? Does the emergence of Advanced Artificial Intelligence (AAI) by creating AI persons alter the whole of the conventional world? Will the earth be inhabited by AAI creatures?

In return for their persistent pursuit for profits, the corporate leaders assure to make noteworthy investments in host countries that would result in dissemination of technology and job creation, outcomes that are widely believed to lead to the enhancement of the overall economic and social surroundings of the host countries. Nonetheless, the chase of this endless corporate growth is not without cost; it has generated asymmetrical economic and technological results not only between developed and developing economies but also between developing and the least developing economies. Given that technology is the engine of economic growth, is the globalization helping or hindering its dissemination in developing countries?

There is fierce global competition concerning AI and so, a solid European approach is required building on the European strategy for AI¹⁵ addressing the opportunities and challenges of AI. Thus, the Commission backs a regulatory and investment-oriented approach with the twin objective of promoting the uptake of AI and of addressing the risks linked with certain uses of this new technology. To that extent, AI involves a number of potential risks, such as opaque decision-making, gender-based or other kinds of discrimination, intrusion in private lives, or being used for criminal purposes.

Aim of the present work is a deep analysis of the alterations and problems caused by new technologies in all fields of the global digital economy and society. The uniqueness of the current project is the overall investigation of the impact of AI upon not only of the law but also upon economics encompassing corporate governance, management, and risk management followed by a quantitative analysis by utilizing econometric regressions stipulating the scale of the impact. Furthermore, the project is divided in two parts, and the first part deals with the impact of AI upon economics followed by the second part concerning the impact of AI upon the Law.

The analysis starts with a profound investigation of the characteristic of cyberspace, which is the original basis upon which new technologies build up. Moreover, there is special reference to advancements of globalization and digital economy due to new technologies with a presentation of Fintech. Additionally, the investigation enters the part of the economic analysis by examining the developments regarding management, governance, corporate governance, and risk management followed by a specific reference and deep analysis of the influence of AI upon them. As a real terms outcome being the clue after a theoretical analysis of the alterations caused by AI is the results of the econometric analysis.

Moreover, the analysis moves on to the legal area by investigating the blockchain environment and the law. AI regulation and legal problems are analyzed for the reason that technology moves faster than law and so, highlighting the legal laps in regulation and proposing solutions for the spotted legal problems. The analysis brings forward answers concerning the legal problems such as AI personhood, etc. and also proposals concerning corporate governance, management, and risk management via AI models. It is worth mentioning here the analysis of the reaction of management and risk management in the COVID-19 period and the role of AI. The work closes with the presentation of the conclusions drawn from the authors’ examination.

Footnotes

1

Phillipe Aghion et al., Artificial Intelligence and Economic Growth (Nat’l Bureau of Econ. Research, Working Paper No. 23928, 2017) (defining artificial intelligence as the capability of a machine to imitate intelligent human behavior [or] an agent’s ability to achieve goals in a wide range of environments.; Sean Semmler & Zeeve Rose, Comment, Artificial Intelligence: Application Today and Implications Tomorrow, 16 Duke L. & Tech. Rev. 85, 86 (2017–2018) (defining artificial intelligence as the process of simulating human intelligence through machine processes); The Petrie-Flom Center for Health Law Policy, Biotechnology, and Bioethics at Harvard Law School, Black-Box Medicine: Legal and Ethical Issues: A Health Policy and Bioethics Consortium (February 8, 2019) (describing the black-box of artificial intelligence algorithms as opaque computational models to make decisions).

2

Michael Copeland, What’s the Difference Between Artificial Intelligence, Machine Learning, and Deep Learning?, NVIDIA BLOG (July 29, 2016), https://​blogs.​nvidia.​com/​blog/​2016/​07/​29/​whats-difference-artificial-intelligence-machine-learningdeep-learning-ai; Yann Ménière & Ilja Rudyk, The Fourth Industrial Revolution from the European Patent Office Perspective, in Intellectual Property And Digital Trade In The Age Of Artificial Intelligence And Big Data 31, 31 (Xavier Seuba, Christophe Geiger, & Julien Penin eds, June 2018), https://​www.​ictsd.​org/​sites/​default/​files/​research/​ceipi-ictsd_​issue_​5_​final_​0.​pdf.

3

Angela Walch, ‘The Bitcoin Blockchain as Financial Market Infrastructure: A Consideration of Operational Risk’[2015]18 NYU J Legislation and Public Policy837 (considering the operational risks created by informal governance processes in Bitcoin and their implications for its suitability as financial market infrastructure); Angela Walch, ‘Open-Source Operational Risk: Should Public Blockchains Serve as Financial Market Infrastructures?’ in David LEE Kuo Chuen and Robert D Deng (eds), Handbook of Blockchain, Digital Finance, and Inclusion Vol. 2 (Elsevier Academic Press 2017) (exploring the operational risks raised by use of grassroots open source software development practices in the use of public blockchains as financial market infrastructures).

4

R. Veugelers (2017) The challenge of China’s rise as a science and technology powerhouse, Bruegel Policy Contribution, Issue n ̊19, July http://​bruegel.​org/​wp-content/​uploads/​2017/​07/​PC-19-2017.​pdf; K-F. Lee (2017) The Real Threat of Artificial Intelligence, The New York Times, 24 June, https://​www.​nytimes.​com/​2017/​06/​24/​opinion/​sunday/​artificial-intelligence-economic-inequality.​html.

5

A. Perkins (2018) Government to review law before self-driving cars arrive on UK roads, The Guardian, 6 March, https://​www.​theguardian.​com/​technology/​2018/​mar/​06/​self-driving-cars-in-uk-riding-on-legalreview.

6

Matthew Dyson and Sandy Steel, ‘Risk and English Tort Law’ in Dyson (ed), Regulating Risk through Private Law (Intersentia 2018) 23. Rene Demogue, ‘Fault, risk, and apportionment of loss in responsibility’ (1918) 13 Ill L Rev 308.

7

Frasier J. & Simkins B. Enterprise Risk Management: Today’s Leading Research and Best Practices for Tomorrow’s Executives. Wiley, 2010.

8

"Management". Business Dictionary.

9

Hubbard, Douglas (2009). The Failure of Risk Management: Why It’s Broken and How to Fix It. John Wiley & Sons. p. 46. ISO/DIS 31000 (2009). Risk management — Principles and guidelines on implementation. International Organization for Standardization.

10

Braithwaite, J., and P. Drahos. 2000. Global Business Regulation. Cambridge, UK: Cambridge University Press.

11

Miller, M.: 2005, ‘Is American corporate governance fatally flawed?’, in D. Chew and S. Gillan (eds.), Corporate Governance at the Crossroads: A Book of Readings (Irwin Mcgraw-Hill, Boston, MA).

12

Lester Thurow, The Future of Capitalism. New York: W. Morrow, 1996. p. 115. The ‘globalization’ topic arises from a cluster of empirical data which show how in many branches and areas of activity, there is a small number of relevant firms operating and there are no national boundaries to competition. So in sectors like finances, telecommunications, aerospace, semiconductors etc. there exists real world-wide competition among a reduced number of firms.

13

PricewaterhouseCoopers, Global Artificial Intelligence Study: Exploiting the AI Revolution 4 (2017), https://​www.​pwc.​com/​gx/​en/​issues/​analytics/​assets/​pwc-ai-analysis-sizing-theprize-report.​pdf; Jonathan Bastable, Is artificial intelligence set to become art’s next medium?, Christie’s (Aug. 20, 2018), https://​www.​christies.​com/​features/​A-collaboration-between-two-artists-one-human-one-amachine-9332-1.​aspx.

14

Oracle, Am. Inc. v. Google Inc., 2014; case BSA v. Ministerstvo kultury ČR, C-393/09, 2010; case SAS Institute Inc. v. World Programming Ltd, C-406/10, 2012.

15

AI for Europe, COM/2018/237 final https://​ec.​europa.​eu/​commission/​sites/​beta-political/​files/​political-guidelines-next-commission_​en.​pdf.

© The Author(s), under exclusive license to Springer Nature Switzerland AG 2021

G. I. ZekosEconomics and Law of Artificial Intelligencehttps://doi.org/10.1007/978-3-030-64254-9_2

2. E-Globalization and Digital Economy

Georgios I. Zekos¹  

(1)

International Hellenic University, Serres, Greece

2.1 Cyberspace Settings

The new era of information technologies is referring to the globalization of communication. The quick decrease of the communication costs enhanced the dealings among countries and is a vital foundation for the structure of a stronger universal civil society. The global communication services have the supremacy to move visible and invisible things from one part of the globe to another. Global communication services influence not only the economic exchanges but also the ideas by way of increasingly widespread communication networks generating political groups and alignments. The supraterritorial cyberspace domain, notwithstanding distances, turns out to be likely via the communication globalization.

In today’s technology-driven world, industry standardization, device interoperability, and product compatibility have turned out to be vital to advancing innovation and competition. Interoperability-centric challenges seem to continue to influence a variety of regulatory topics. Moreover, interoperability is one of the huge challenges of the convergence that occurs as a multilevel compatibility problem, purposely at the network, service, content, and terminal equipment levels.¹ To attain interoperability and administer convergence-based complexities, the use of common standards and protocols or the use of a conversion function to map between diverse services would be needed. Furthermore, the notion of interoperability, resting at the center of network industries, is broader than merely a cyberspace entrée debate, as it influences innovation in software. The essential relationships among the components of the network, complementarity and compatibility, are present in many nonnetwork industries, including financial intermediation and the exchange of financial instruments and assets. Complementarity requires compatibility and coordination.

This author² considers that cyberspace is an electronic place that conforms to our understanding of the real world, with private spaces such as websites, e-mail servers, and fileservers, connected by the public thoroughfares of the network connections. Moreover, cyberspace is the virtual space and place created by operation of the Internet,³ a network of computers that share information with each other, and any other electronic networking resulted by different electronic devices such as satellites and cellar phones that can be interconnected and producing a global virtual reality network accessible by different electronic devices currently from earth but why not from people out of space or virtual entities outside our space or of another dimension livelihood within our space without currently being tracked by humans. It has to be taken into consideration that virtual events can be understood by human beings by the use of electronic devices transforming electronic signals into words and pictures viewed and comprehended by human beings and not virtual ones.

It is argued that what cyberspace is remains highly contested, making agreement on its boundaries nearly unmanageable. Moreover, it could be said that outlining what cyber operations are has caused equally intractable questions as to which sets of international law rules apply and how they do so. Besides, where theoretical disputes do not exist, the functions boundaries are open to contest as an affair of (a) accuracy, (b) effectiveness, and (c) completeness. A law’s functions may be conditional on, or derivative of, a satisfactory theory for why the law exists which does not mean that theoretical variances preclude agreement on such functions completely. Sometimes, agreement is achievable even without agreement on why this is the case which means that in a global domain of diverse interests incompletely theorized agreements are anticipated.⁴ To that extent, relying on law-by-analogy to define explicit IHL thresholds can engender erroneous lines if they do not adjust nonanalogous characteristics of cyberspace and cyber operations. To that extent, it is worth noting that the question is not where law’s boundary lines go, but whether boundaries can work at all. To that extent, a boundary’s effectiveness depends on definite criteria such as a degree of determinacy and constraint being difficult to warrant given cyberspace’s predominant conditions such as anonymity. Additionally, the confining reason of borders causes an imperfect regulatory response to cyber operations, not just owing to incorrect or ineffective line drawing but also for failing to underline law’s other competences such as authorizing behavior. Furthermore, predominant difficulties on whether, where, and why borders are required in cyberspace imply that there is a need for re-appraising the existing landscape.⁵

Sovereignty is an adaptable perception. The term sovereignty has a range of meanings, and in its widespread modern treatment, sovereignty is the term for the totality of international rights and duties recognized by international law⁶ as residing in an autonomous territorial unit – the State. Sovereignty is an in-house perception, related only to the basis of legitimate authority within a state. Henkin⁷ argues that universal human values have superseded state values at the foundation of international law. In addition, Krasner⁸ views sovereignty as a supposed limitation on states’ power to interfere in each other’s affairs. Sovereign nation state is an entity whose sovereignty jointly derives from the sole jurisdiction to make laws for its people and its freedom from the coercive authority of any other state.⁹ Moreover, the state lies upon the foundation of sovereignty, which expresses internally in the supremacy of the governmental institutions and externally as the supremacy of the state as a legal person.¹⁰ The courts derive its power to adjudicate a matter from the state. Therefore, the concept of jurisdiction is based on the concept of state.

The jurisdictional bases are the following: first territoriality; under the principle of territoriality, jurisdiction is based on acts that have been executed within the territory of the State in question. An alternative of this is the objective territoriality principle, purporting that the function in question was begun abroad but concluded within the territory of the State or that a constitutive part of the conduct happened within the territory.¹¹ Second personality: under the principle of personality, jurisdiction is upheld by the State of nationality of the perpetrator (active personality principle) or of the victim (passive personality principle).¹² A number of countries confine passive personality jurisdiction to the cruellest of crimes, such as terrorist hijackings and crimes against humanity. Third effects doctrine: the effects doctrine jurisdiction is established on the fact that conduct outside a State has effects within the State but it is open ended, given that in a globalized economy, everything has a consequence on everything.¹³ All countries have a connection to all websites by virtue of their accessibility. Should the effects doctrine a fortiori be rejected completely on cyberspace? The divergence between the objective territoriality principle and the effects doctrine is vanishing because of cyberspace, given that the act of letting a message or information be seen in another territory and the effect caused by it are tricky to differentiate.¹⁴ Fourth protective principle: The protective principle is considered to protect a State from acts performed abroad that put at risk its sovereignty.

The territorial jurisdiction of states and the jurisdictional limits of the municipal courts are established on the territorial theory. Personal jurisdiction depends on some quality attaching to the person involved in a particular legal situation which justifies a state or states in exercising jurisdiction in regard to him/her. Moreover, personal jurisdiction may be exercised on the basis of one or other of the following principles: (a) active nationality principle: Under this principle, jurisdiction is assumed by the state of which the person, against whom the proceedings are taken, is a national, and (b) passive nationality principle: Jurisdiction is assumed by the state of which the person suffering injury or a civil damage is a national. It has to be taken into account that it has not been established an effective or recognized customary international law that controls personal jurisdiction.¹⁵

Is the present emphasis on drawing law from boundaries and boundaries from law an adequate or effective way to regulate cyberspace and its conflicts? It is worth noting that cyberspace lacks a uniform foundation for why it needs boundaries, since cyberspace is endless, there is no possible to enclose cyber actions in a state sovereignty but the effects of cyber actions can be felt in states’ boundaries. It is worth noting here that even though the belief that law is dependent on the materialities of place has long been challenged, nonetheless the Westphalian origins of sovereignty today remain very much alive, even if their current-day manifestations are constantly transforming.¹⁶ The developments on cyberspace and artificial intelligence have brought forward doubts about the essence of sovereignty, but regardless of the contemporary decline of state sovereignty, the enduring and expansive spatial reach of state power to counter threats to sovereign territorial control is taking place. Paul Linden-Retek¹⁷ deems that in confronting the new ‘spaces’ of international entanglement, judges must redeem the idea that citizens might yet reclaim those entanglements as a ‘common world’, not just a space in which they are brought together, unfreely, under the mantle of state coordination and coercion.

The technologies and virtual places that represent cyberspace have been assimilated into the lives of people who accept the Internet as a tool for pursuing their common, real-world needs. The information circulated in cyberspace is produced by real people. People can use cyberspace framework only for their online dealings.¹⁸ Other people can use cyberspace setting for free circulation of ideas or having the impression of traveling virtually in many other places.¹⁹ Even why not if it is made possible, in the distant future, to achieve interconnection with digital networks of other civilizations living out there in space.

Courts are using the metaphor of cyberspace as a place to justify application of traditional laws governing real property to this new medium.²⁰ It should be taken into account that the Internet is not just like the physical world. Not every website is necessarily a purposeful availment of the benefits of every forum state.²¹ Furthermore, the courts showed significant keenness to treat Internet and paper transactions as equals – comparable results should be reached if not there is a reason to treat them in a different way.²² For instance, a contract cannot be denied enforcement solely because it is in electronic from or signed electronically.²³ On the Internet, problems of physical infrastructure and overcrowding are less apparent because it is a different dimension,²⁴ but it has to be taken into account that electronic infrastructure used to accommodate the operability of cyberspace causes very often many problems due to its material feature. Moreover, information is saved in electronic devices and is not freely circulated on earth like sound, wind, or oxygen and so, controlled by the owners of the electronic devices.

Cyberspace allows the implementation of different activities such as online gaming, online banking, fan fiction, and comparison shopping. In fact, cyberspace brings forward a question of allocation of rights and responsibilities in virtual space. What occurs in cyberspace is related with what occurs in real space. People are using cyberspace and circulate information or contact electronic transactions. Information access and control in cyberspace have consequences that reflect into real space because it is people in real space who require information residing in different jurisdictions.²⁵ Thus, lives and concerns of people using cyberspace are inextricably rooted in real space.

Space encompasses geographic/mapped places representing both totality and infinity. To that extent, cyberspace as a virtual space encompasses virtual places with a virtual totality and infinity and the countless amount of virtual places constitutes the cyber place of cyberspace. Hence, cyberspace includes many cyber places. Moreover, cyberspace is a separate space in a virtual dimension viewed and operated by electronic agents programmed by humans. It is necessary to be made the distinction between cyberspace as the place and space where different type of virtual activities can take place that have an effect on humans and cyberspace as a virtual place and space where virtual functions can take place which are only virtual without affecting humans. Cyberspace as a virtual space and place can be used by virtual entities and electronic beings, but presently human being do not have this ability to be transformed from human being into electronic beings and vice versa. The future use of cyberspace – not merely Internet – by virtual entities and electronic beings to inflict the real world cannot be overruled in advance which will cause different problems giving a different dimension into the phenomenon of cyberspace needing a state’s intervention. The production of electronic beings that will function only electronically on behalf of human beings cannot be rejected for the distant future. It is open to research if cyberspace in its current form or a new more advanced cyberspace based on wireless communication can be connected with unknown electronic/digital systems own by civilizations out of our planet but within the endless cyberspace.

Cyberspace is not a real place and so, users can adopt a new electronic identity with which travel in cyberspace. The electronic user always will correspond to a real person who can adopt many different electronic identities as technical identities allowing him/her to use cyberspace not mentioning purely electronic agents that can be used in electronic transactions. Which is the liability of electronic agents? Electronic agents will continue to remain electronic agents created by humans to act as electronic agents having no liability. On the other hand, humans even as electronic users have finally liability for any misgivings caused by their electronic transactions.²⁶

2.2 Cyberspace Governance

Conventionally governance has been related with governing, denoting formal political institutions aiming to organize and control interdependent social relations possessing the capability to enforce decisions. Moreover, governance denotes the regulation of interdependent relations in the absence of overarching political authority, such as in the global system.

As a general rule, governance is the set of tasks and practices exercised by those in charge for an enterprise with the objective of providing strategic direction, guaranteeing that objectives are accomplished, making certain that risks are administered properly and verifying that the company’s means are utilized responsibly. Increasing computer interconnectivity – particularly growth in the use of the Internet/cyberspace – has transformed the way that governments, states, and much of the world communicate and perform business. The numerous networks that make up the Internet/cyberspace embrace the national backbone and regional networks which networks run by individual businesses or enterprise networks. The global interconnectivity provided by the Internet/cyberspace permits cyber-attackers such as criminal groups, hackers, and terrorists to with no trouble cross national borders, contact great numbers of victims at the same time, and effortlessly preserve anonymity.

E-government is an innovation in the public sector making public services less expensive and more open²⁷ and so, offering the equipment for innovative interactions between a government and its citizens and intelligent ways to supply public services.²⁸ E-government brings the government closer to citizens, defeating the barriers of bureaucracy, reducing corruption, and making decision-makers more reactive to people’s needs, which means that e-services of e-government are characterized by greater efficiency and transparency.²⁹ Moreover, the functional components of e-government, such as e-infrastructure, e-services, and access to public information, have a raison d’être upon anticorruption effect by enhancing the transparency of procurements system, making public services more easily reached and clear, and making certain a global citizens’ access to information. Furthermore, e-access to government information is a vital good governance tool in making certain the execution of state obligations and raising the accountability to citizens.³⁰

Governance of the cyberspace is carried out by so-called multistakeholder (MSH) organizations such as the Internet Society and the World Wide Web Consortium which entities have principally established the norms and standards for the global Internet/cyberspace. Cyberspace governance implies the capacity to enforce mandates limited in the framework of Internet governance as performed by MSH processes varying from the soft power of rough consensus to the hard power of international law and binding treaties. For the reason that the Internet/cyberspace works around and beyond political boundaries, efforts to censor Internet/cyberspace speech have proven complex and ineffective. Waz and Weiser³¹ say that it will be important to establish an understanding as to whether, when, and how sovereign governments should defer to MSH processes, should themselves be recognized as stakeholders in such processes, and should empower or backstop such processes.

Cyber-security governance verifies how generally accepted management controls such as risk assessment controls are adapted, supplemented, and utilized in the face of the advanced persistent threat and mirroring the total enterprise risk management strategy and enterprise risk governance structure.³² In addition, cyber-security³³ governance refers to the element of corporate governance that tackles the enterprise’s dependence on cyberspace in the presence of opponent and so, covering information systems security governance. Moreover, cyber-security governance is the section of corporate governance regarding organizational dependence on cyberspace in the presence of adversaries as a domain of enterprise risk management. Deb Bodeau et al.³⁴ specify that Cyber Prep provides a framework for assessing, and identifying gaps or possible areas of evolution in, an organization’s cyber-security governance structures and practices. Achieving cyber-security governance consistent with its target Cyber Prep level enables an organization to make consistent and understandable decisions about investing in security measures; aligning cyber-security risk management with other aspects of enterprise risk management; and managing the organization’s cyber-security posture.

The growth of cyberspace has been portrayed by an emphasis on interoperability, effectiveness, and freedom but our increasing reliance has not been matched by efforts to keep it secure reflecting the original rationale of the web, which was to exchange scientific data, rather than to assist an entire global economy. The upsurge of use and functionality of cyberspace has outpaced efforts to restructure and secure the original cyberspace’s infrastructure. Cyber security includes borderless challenges, while responses remain overpoweringly national in scope and even these are unsatisfactory. Moreover, cyber security characterizes an increasing challenge to democratic governance, as public and private efforts to secure cyberspace. IT networks supervise the traffic that they carry has to be balanced with human security anxiety and, above all, with human rights to privacy and to freedom of expression and association. Benjamin S. Buckland, Fred Schreier, and Theodor H. Winkler³⁵ argue that democratic governance concerns – particularly regarding control, oversight and transparency – have been almost entirely absent from the debate. These concerns are exacerbated by the enormous role played by private actors (both alone and in cooperation with governments) in online security of all types. Given the pace at which states and private companies are reinforcing online security and preparing for cyber war, addressing democratic governance concerns has never been more pressing.

The G7/8 addressed the problems of coordinating policies regarding the governance of cyberspace dealing with governance issues, including, among others, the formation of norms, principles, and rules concerning the interconnection of computer networks via networks of networks such as the Internet/cyberspace, rights of access to those networks, pricing of access, observing of network-mediated economic transactions, intellectual property protection, taxation of goods and services delivered via cyberspace, matters of privacy, security, and a range of other subjects thought to influence the trust of cyberspace’ users.³⁶ According to Jeffrey A. Hart,³⁷ in areas, such as Internet governance, where private actors are needed both to provide accurate informational inputs to form and implement new norms, rules, and procedures, a properly configured multistakeholder approach is both necessary and desirable.

2.3 Digital Economy Background

FDI is central to understand both financial and real economic links between economies, but the presence of offshore financial centers and SPEs conceal ultimate bilateral linkages. However, FDI is not only regionally clustered, but investments are also spread out between many economies with direct FDI links.

It is worth noting that global FDI network is a new synergy within which AI is implemented and so, the comparison of global FDI networks is based on different FDI measures. In fact, the United States, the Netherlands, and Luxembourg rule the FDI network based on the CDIS, and so, the network discloses a very high degree of connectedness where most economies have FDI links vis-à-vis each other. Moreover, it is worth mentioning here that the new global FDI network advances several insights and formal facts that provide a different picture of long-term relations between economies and final investment patterns than traditional FDI data.³⁸

It is characteristic that traditional key economies become more dominant in the adjusted global FDI network, but financial centers remain vital for FDI even after removing SPEs which means that entities located in financial centers also take an active role in managing FDI rather than only acting as passive holding corporations.

FDI has become more responsive to taxation over time and MNEs optimize taxes through SPEs, and so, tax optimization often encompasses shifting profits to a low-tax jurisdiction through debt allocation, transfer pricing, or corporate inversions. To that extent, MNEs allocate most of their debt to a high-tax economy to take advantage of high interest deductions while shifting profits to low-tax jurisdictions. Additionally, MNEs use unrecognizable transfer pricing to shift profits to low-tax jurisdictions through sales of goods and services between affiliates and so, influencing FDI through profits and retained earnings.³⁹ It is worth noting that the European Commission has ruled that the tax authorities in Ireland, Luxembourg, and the Netherlands have allowed Apple, Fiat, and Starbucks to use transfer prices that do not echo underlying economic prices and so, violating EU state aid rules.⁴⁰ It seems that international corporate structures are used to shift profits away from high-tax jurisdictions.⁴¹

The link between FDI and real economic activity is growing as corporate structures, and financing mechanisms become more global. While FDI measures financial investments, it is traditionally used as a proxy for real economic activity caused by foreign-owned corporations and long-term relations between economies. Nonetheless, with gradually multifaceted and flexible MNE structures and widespread use of SPEs, the strong SPE presence in certain economies is an imperative cause for the decoupling between FDI and real economic activity due to the fact that the SPEs break the direct link between the receiving economy and the ultimate owner. Subsequently, SPEs make it difficult to separate real financial integration and diversification from financial engineering.

It is argued that FDI financing through SPEs is often only transitory and so, a high positive correlation between quarterly FDI inflows and outflows in several economies means that FDI inflows are often just passing through an economy on the way to their final destination.⁴² Furthermore, it seems that FDI positions have continued to expand in the consequences of the financial crisis emerging from FDI positions vis-à-vis financial centers attributed to the growing complexity of the corporate structures of large MNEs.

2.4 Digital Economy Developments

All sectors of the economy have adopted ICT to increase productivity, enlarge market reach, and diminish operational costs. Moreover, this adoption of ICT is demonstrated by the spread of broadband connectivity in businesses, which in almost all nations of the Organisation for Economic Co-operation and Development (OECD) is complete for large enterprises and reaches 90% or more even in smaller businesses. To that extent, the extensive adoption of ICT, along with the rapid decline in price and surge in performance of these technologies, has added to the occurrence of new activities in both the private and public sectors. In addition, these technologies have multiplied market reach and lowered costs, and they have enabled the advance of new products and services and so, altering the ways in which such products and services are manufactured and delivered, as well as the business models used in firms ranging from MNEs to start-ups. It is worth mentioning here that the advent of cyberspace brought key alterations first to the entertainment, news, advertising, and retail industries.

Are there central characteristics of the digital economy? There are a number of characteristics that are increasingly noticeable in the digital economy and which are possibly relevant from a tax perspective. While these features are not all present at the same time in any particular business, they increasingly portray the digital economy encompassing mobility, reliance, networking, and volatility. In fact, mobility refers to (1) the intangibles on which the digital economy depends on heavily, (2) users, and (3) business functions as a result of the declined requirement for local personnel to accomplish particular functions along with the flexibility in many cases to select the location of servers and other resources. Moreover, reliance refers to dependence on data and so, encompassing the use of so-called big data as well. In addition, network effects indicate reference to user participation, integration, and synergies which means that utilization of multisided business models in which the two sides of the market are in different jurisdictions. There is a tendency toward monopoly or oligopoly in particular business models relying heavily on network effects, and so, it has generated volatility owing to low barriers to entry and rapidly advancing technology.

The digital economy offers consumers access to information formerly inconceivable in any traditional marketplace. Yet that information and more is also available to retailers who are able to use pricing software to maximize profits. In the past, anticompetitive conduct entailed proof of a meeting of the minds to collude on prices or abuse market dominance, but the speed with which prices are adjusted today means that tacit collusion may take place without any intent on the part of market actors or even without any formal coordination between their computer programs.

Due to the mobility of intangibles, the advancement and utilization of intangibles is a crucial element of the digital economy, and so, investment in and development of intangibles are a principal contributor to value formation and economic growth for firms in the digital economy. Hence, digital firms rely on software and so, expend extensive resources on research and development to advance existing software or to develop new software products. In addition, mobility of users means that progresses in ICT and the enhanced connectivity that portrays the digital economy indicate that users are progressively able to continue commercial activities remotely while traveling across borders.

Nevertheless, mobility of business functions shown by enhanced telecommunications, information management software, and personal computing has diminished the cost of organizing and co-ordinating complex activities over long distances which means that businesses are able to accomplish their global operations on an integrated basis from a central location that may be removed geographically from both the locations in which the operations are carried out and the locations in which their suppliers or customers are located.

It is worth noting that the capacity to manage business centrally while keeping substantial flexibility over the location of business functions has amplified the capacity of businesses to spread functions and assets among multiple different states. In fact, while globalization of business among larger organizations is not a new incident, the spread of the digital economy, linked with the growing significance of the service component, along with reductions in trade costs owing to trade and investment liberalization and regulatory amendments, has removed logistical barriers expanding the speed at which such globalization is achievable.

Technological advances have also allowed greater integration of global businesses, which has augmented the flexibility of corporations to spread their actions among several locations globally, even if those locations are distant from each other and from the physical location of their final customers. Moreover, in the digital economy, reliance on data is common and so, corporations collect data about their customers, suppliers, and operations.

In reality, network effects refer to the fact that decisions of users have a direct influence on the benefit received by other users which means that these network outcomes are an imperative feature of many companies in the digital economy. Network effects are seen whenever compatibility with other users is vital, even where the primary reason of a specific technology may not be to co-operate with others.

It has to be taken into account that the digital economy includes two categories of multisided business models. First, a business can operate several applications that offer complementary services by generating two types of synergy: on the one hand, the numerous activities combine their resources such as executable code, content, or user data; on the other hand, the activities may be put into a package that is more attractive for users. Second, vertical platform models are exploited to make resources available for third-party developers in an attempt to attract their creativity as part of open innovation strategies. Moreover, a platform is the consequence of the large-scale development of an application that gets commoditized. A firm can build up a social networking service, using internally created applications to attract customers and funding operations via the sale of advertising. In addition, the firm can also choose to open an application programming interface (API) which permits developers to easily employ applications using the platform and so, access to the API diminishes the developers’ initial investment and assists their access to the market of customers that use the platform. Sequentially the participation of the developers augments the user experience, thereby further strengthening the firm’s position in the marketplace.

It is worth noting that in some markets, predominantly where a firm is the first actor to gain traction on an immature market, network results joined with low incremental costs allow the firm to get a dominant position in a very short time and so, this capacity to gain traction is boosted where a patent or other intellectual property right grants one competitor the exclusive power to utilize a specific innovation in a certain market.

Likewise, it has to be taken into consideration that technological progress has led to progress in miniaturization and a drop in the cost of computing power and so, neither a cyberspace user nor the service provider is required to pay a marginal price for using the network, which means that these elements, linked with increased performance and capital expenditure, have markedly reduced barriers to entry for new cyberspace-based businesses. Moreover, these factors have joined to promote innovation and the constant development of new business models and so, in short term, firms that control a considerable part of the market and enjoyed a dominant position for a short period of time have found themselves rapidly losing market share to challengers that built their businesses on more powerful technology, a more attractive value proposal, or a more sustainable business model. Hence, as a result of the fast pace of innovation, the few firms that have achieved long-term success normally have done so by investing extensive capitals in research and development and in acquiring start-ups with innovative ideas, launching new features and new goods, and repeatedly evaluating and adjusting business models so as to leverage their market position and uphold dominance in the market.⁴³

2.5 Finance and Globalization

Finance has become one of the most globalized and digitized sectors of the economy. Moreover, globalization, digitization, and money are boosting AI in finance forward at an ever-increasing pace. In line, Zetzsche⁴⁴ et al. argue that the use of AI in finance comes with three regulatory challenges: (1) AI increases information asymmetries regarding the capabilities and effects of algorithms between users, developers, regulators and consumers; (2) AI enhances data dependencies as different day’s data sources may alter operations, effects and impact; and (3) AI enhances interdependency, in that systems can interact with unexpected consequences, enhancing or diminishing effectiveness, impact and explainability. These issues are often summarized as the ‘black box’ problem: no one understands how some AI operates or why it has done what it has done, rendering accountability impossible. It could be said that bolstering cyberspace governance of regulated financial market participants through external regulation is the way forward in AI era. In other words, the most effective course forward implicates regulatory approaches which bring the human into the loop, augmenting internal governance through external regulation. Thus, the application of the principles of governance in an AI environment is an answer.

In the context of finance, the post-Crisis concentration on personal and managerial responsibility systems offer a central external framework to augment internal accountability in the context of AI which means that AI-tailored manager responsibility frameworks, augmented in some cases by independent AI review committees, as developments to the conventional three lines of defense is the most effective way for dealing with AI-related matters not only in finance concerning black box problems then again possibly in any regulated business.

2.6 From Conventional Globalization to E-Globalization

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It is worth noting that major alterations in technology, geopolitics, environment, and society push forward a new phase of globalization. It is worth noting that the convergence of globalization and digitization denotes that business leaders and policy-makers will need to reassess their strategies. Thus, it has to be taken into account that digital platform enterprises are an essential part of the global economy.

Taking into account that the web of global economic connections is growing deeper, broader, and more complex, nowadays digital form of globalization is shifting who is participating, how business is done across borders, how quickly competition moves, and where the economic benefits are flowing. It is worth mentioning here that while advanced economies continue to be the leaders in most flows, the road has opened to more countries, to small firms and start-ups, and to billions of people.

FDI is a crucial link in global economic interconnectedness and is widely used to analyze globalization of production, attractiveness of an economy, long-term relationships between economies, technology transfer, and real economic activity produced by MNEs. In today’s unpredictable and hypercompetitive global markets, achieving and sustaining competitive advantage necessitate not only the creation of superior customer value but also the continuous pursuit of operational effectiveness. Synergy⁴⁶ is supposed to lead to a competitive advantage as two or more units of a company share know-how or resources, coordinate strategies, and pool negotiation power. Thus, capturing cross-business synergies is an essential part of corporate strategy. As competition is growing more intense, firms look for synergies in their overall global purchasing effort across business units. Synergy initiatives often fall short of management’s expectations and might even distract managerial attention.⁴⁷ Hayes⁴⁸ argues that a coordinated global sourcing for competitive advantage is a logical extension of respectively domestic and foreign sourcing. Cultural differences and local market conditions might further prevent companies from realizing global efficiencies. Can globalization be achieved without the expansion of MNEs and their activities? Mobility of labor and capital, transfer of technology and innovation, advanced technology, and evolvement of cyberspace have been achieved by the development and expansion of MNEs and their role in international trade. Application of advanced technology in production and management of MNEs led to the evolvement of e-commerce and consequently to digital economy. Does globalization associate with progress, prosperity, and peace? Globalization necessitates the creation of a new paradigm of social and political enquiry and is associated with technological revolutions in transport, communications, and the data processing deriving to centrality of manufacturing industry in a global economy deriving to a digital economy.

It has to be taken into consideration that sources of FDI as actors in a society are acting differently conditional to the institutional structure of the host society. Moreover, institutions are central economic growth factors due to the fact that institutions offer a framework for interaction with foreign investors. Thus, FDI can be beneficial to growth depending on the institutional quality of the host country and so, weak governance performance is linked with government ineffectiveness, ineffective rule of law, political instability, and poor accountability among other governance factors.⁴⁹

FDI-financed firms are highly sensitive to the governance framework of the host country and so, institutional quality does not only attract FDI but also strengthens the growth results of FDI in the continent.⁵⁰ M. Ngundu, N. Ngepah⁵¹ argue that the impact of EU and US is unique from that of Asia in two ways. First, their impact on growth in Africa is divided upon weak and strong governance performing countries. Second, their impact of weak governance performing countries is non-significant… US and the EU investments are channelled towards African countries with relatively effective rule of law although the former is more sensitive than the latter. Whereas China do investment both in weak and strong governance countries.

A strengthened framework of global cooperation is required to speed up progress on shared challenges and lessen tensions among and within states. Technological transformation is altering the way economies and societies organize themselves in national policy helping societies maximize the benefits and mitigate