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Impact of outward FDI on home country exports

Niti Bhasin (Department of Commerce, Delhi School of Economics, University of Delhi, New Delhi, India)
Kanika Kapoor (Department of Commerce, Delhi School of Economics, University of Delhi, New Delhi, India)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 1 July 2020

Issue publication date: 22 July 2021



The relationship of outward foreign direct investment (OFDI) with home country's exports has significant implications for policymakers as well as business managers of MNEs. Since BRICS nations have emerged as important sources as well as destinations of FDI, this paper aims to study the impact of OFDI from these countries on home country exports by using panel data for BRICS for time period 1993–2015.


The author use panel unit root tests, panel cointegration, VECM and causality tests in the study.


The results reveal that OFDI has a negative and significant impact on home country exports indicating that outward FDI is a substitute for exports in these countries. It also indicates long-run causality from exports towards OFDI. There is no long-run causality running from OFDI to exports, suggesting that MNEs do not “connect” with home economies' firms through forward and backward linkages in value chain.

Practical implications

From the point of view of policymakers, it implies a net outflow of capital as the outflow of foreign investment would not be matched by any incremental export earnings since exports are getting substituted by production abroad. For business managers, it is indicative of a growing foreign market that warrants large scale production and justifies the high cost and risk involved in FDI as a mode of entry compared to exports.


To the best of authors' knowledge, this is the first attempt to deal with the relationship between home country exports and OFDI, for an important group of emerging market economies, i.e. BRICS. The understanding of this relationship allow us to identify whether factors contributing to OFDI from emerging economies are “tied” to their home economies thereby making exports necessary or are rather based on firm specific competencies which are leveraged in different locations to cater to expanding markets.



Bhasin, N. and Kapoor, K. (2021), "Impact of outward FDI on home country exports", International Journal of Emerging Markets, Vol. 16 No. 6, pp. 1150-1175.



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