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Motives for foreign direct investment: a view from emerging market multinationals

Pavida Pananond (Thammasat Business School, Thammasat University, Bangkok, Thailand)

Multinational Business Review

ISSN: 1525-383X

Article publication date: 20 April 2015

2773

Abstract

Purpose

The purpose of this paper explains how the framework on motives of foreign direct investment (FDI) needs to be rethought when analyzing emerging market multinational enterprises (EMNEs). It argues that the weak position of emerging market firms and their interdependent relationship with lead firms in global value chains (GVCs) modify the selection of internationalization motives.

Design/methodology/approach

The arguments are illustrated through a critical review of the literature on FDI motives and a discussion on how the literature can be extended from looking through the lens of emerging market multinationals, particularly those with early development as suppliers in global value chains.

Findings

The weak position of emerging market firms and their interdependent relationship with lead firms in global value chains modify the selection of internationalization motives on two aspects. First, internationalization decisions of EMNEs in GVCs are not undertaken in an independent manner. Rather, decisions are influenced by the initial position along the value chain and the dynamic relationships that these EMNEs have with lead firms. Second, the selection of FDI motives of these EMNEs reflects both their international expansion strategy and the upgrading effort they wish to pursue to undertake higher value-adding activities along the GVCs.

Originality/value

These implications addressed in this paper add more nuances to the interpretation of FDI motives. Previously viewed mainly from the perspective of lead firms, FDI decisions are considered as independent alternatives that multinational enterprises (MNEs) can undertake to fulfill their internationalization strategy. Revisiting the FDI motives from the perspective of EMNEs reveals further insights on the interdependent nature of their internationalization, particularly reflecting the weaker position of EMNEs and their interdependent relationship with lead firms in their industry.

Keywords

Acknowledgements

I gratefully acknowledge comments received from Rajneesh Narula, Alvaro Cuervo-Cazurra and conference participants at the Reading International Conference on International Business 2013, University of Reading. This paper draws on insights generated from research projects sponsored by Thailand Research Fund (5280032, 5610054). The author thanks the Thailand Research Fund for their financial support and Naunghathai Intakhantee, Kannapa Chartiyanon and Warunporn Chueawanit for their research assistance.

Citation

Pananond, P. (2015), "Motives for foreign direct investment: a view from emerging market multinationals", Multinational Business Review, Vol. 23 No. 1, pp. 77-86. https://doi.org/10.1108/MBR-02-2015-0008

Publisher

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Emerald Group Publishing Limited

Copyright © 2015, Emerald Group Publishing Limited

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