Company oriented investment interest and cross‐border transactions under globalisation: Geographical proximity still matters

Abstract

Purpose

To investigate the trends of world foreign direct investment (FDI) flows during the last decades and to explore the reasons behind these trends and to examine the role of multinationals and their investment activities.

Design/methodology/approach

This paper is based on the statistical data of FDI flows throughout the world and on an action field research which was also based on multinationals' investment behaviour. The FDI trends and the role of multinationals are evaluated.

Findings

FDI can play a key role in improving the capacity of the host country to respond to the opportunities offered by global economic integration, a goal increasingly recognized as one of the key aims of any development strategy and an increased growth rate. World FDI inflows grew rapidly and faster than world GDP and world exports during the last two decades. There was a dramatic increase in FDI over the last decade (until 2000) which was based on globalisation and economic integration, technological improvements in communications, information processing and transportation, the changing framework of international competition and the deregulation of several key sectors. There was a dramatic decrease in FDI flows after the year 2000 due to the slowdown in the world economy. M&A deals are the most important driving factors behind overall FDI flows when at least one third (up to two third) of the total FDI flows are due to the M&A cross‐border deals.

Research limitations/implications

The research should be also be expanded in continents (for example, Asia, America) in order to examine the multinationals' investment activities and behaviour in order to conclude about the FDI trends more thoroughly.

Practical implications

More investment interest must be given to the developing or transition countries in which (where) the flows in absolute terms are too low. Moreover, the absence of large cross‐border merger and acquisitions in these countries, can obviously be explained by the lack of the existence of significant and well‐known large companies which could have the potential to become significant world players in the sector that they belong to.

Originality/value

It is a valuable paper for scholars, entrepreneurs and multinationals who prefer to understand the reasons behind the FDI trends and/or for the governments/politicians who prefer to create a framework in order to attract FDI flows to their countries by examining the experience of other countries.

Citation

Bitzenis, A.P. (2005), "Company oriented investment interest and cross‐border transactions under globalisation: Geographical proximity still matters", European Business Review, Vol. 17 No. 6, pp. 547-565. https://doi.org/10.1108/09555340510630572