Search results

The purpose of this paper is to explore the motivations underpinning the foreign direct investment (FDI) activities, including the location and entry mode decisions, of nascent multinational enterprises (MNEs) from West Africa.

This research adopted a case study approach entailing the triangulation of interview data with documentary evidence on two leading West African financial service companies that have FDI footprints in over 50 country markets.

Evidence suggests the primacy of market-seeking motivations in explaining the FDI activities of the explored nascent MNEs, with relationship, efficiency and mission-driven motivations emerging as strong sub-themes. Having neither the global resonance of their traditional counterparts nor the government-augmented resource profile of their Asian counterparts, the study firms appear to have shied away from costly strategic asset and prestige-seeking FDI, and preferred psychically and institutionally proximate sub-Saharan African markets and non-organic collaborative entry modes.

The above insights should be considered tentative given the study’s limited evidence base. This underscores the need for a larger scale empirical effort to assess the propositional inventory outlined at the end of this paper.

Africa’s growing population of MNEs are urged to continue to strengthen their positions across African markets, view these regional markets as a platform to learn and upgrade their capabilities for future expansion into more challenging global markets, and to augment their limited resource profiles, including by tapping into their global diaspora networks. Policy makers should support their market-seeking initiatives given evidence that they could be a pathway to higher order FDI motivations. This evolutionary approach reflects enduring lessons from earlier generations of MNEs. Policy makers should also support continuing intra-African investment flows as a pathway to creating more sizeable, integrated African markets and generating positive spill-overs, including in typically blind-sided post-conflict or fragile African markets. This also entails pushing for cross-border regulation needed to minimise the transfer of systemic risks across countries.

The study provides rare empirical evidence on hitherto neglected MNEs from sub-Saharan Africa, thus extending the geographic compass of research on FDI motivations. It identifies some distinctive aspects of the explored MNEs’ FDI behaviour, including the previously unheralded mission-driven motivation, whilst also revealing shared characteristics with traditional MNEs and emerging market multinational enterprisess.

Outward foreign direct investments (FDI) by Turkish firms in the new millennium show intriguing geographic distribution pattern and unlike the predictions of classical theories of FDI. In this study we contribute by linking the observed pattern of outward FDI with Turkish firms’ motivation for investment across national borders. We enrich research by collecting and analyzing FDI motivation data at the firm-level for a very important but less researched developing country: Turkey. Content analysis of text material on the foreign investments made by 211 Turkish firms reveals that Turkish firms primarily perform FDI in European developed countries for reasons other than conventional, namely, market- and strategic-asset-seeking motivations. More importantly, Turkish firms seem to be using the European countries to (1) present themselves as a European Union company, (2) make use of special features of these countries to expand their businesses within and to other countries and, (3) make use of the favorable tax treatment policies available to foreign investors. Surprisingly, our analysis shows that in spite of its small size, the Netherlands is a preferred destination for Turkish FDI over other Western European countries due to its strategic location and favorable investment policies.

The purpose of this paper is to complement the conventional international business (IB) theory, the OLI perspective, which is good at explaining the foreign direct investments (FDIs) undertaken by developed market multinational corporations (DMNCs). This study also suggests a new theoretical framework, namely, the OILL paradigm, that is able to encompass FDIs from emerging market multinational corporations (EMNCs) toward developed economies.

The data comprising 206 Chinese MNCs, which completed international mergers and acquisitions (IMAs), were obtained from Zephyr. By using these data, logical regressions are conducted to statistically confirm that we should not omit the learning motivation if we want to adequately understand the FDI phenomenon by encompassing investment flow from developing (or emerging) to developed countries.

The results based on this data set indicate that EMNCs often try to enter developed economies with the motivation to seek sophisticated foreign host knowledge that is not available internally. In particular, they tend to use IMA strategies when they want to learn from heterogeneity (i.e. inter-industry mergers and acquisitions) and absorb advanced technologies from DMNCs.

By shedding light on the recent new trend in FDI (i.e. FDI from emerging countries to developed economies), the study provides useful theoretical implications, as well as suggesting scholarly contributions. However, we should acknowledge that there are some limitations to this study. First, the study explores only Chinese MNCs. Second, learning motivations need to be minutely and precisely measured by other studies. Third, this study argues that FDI from EMNCs to DMNCs is triggered by the former’s motivation concerning knowledge acquisition. However, the type of knowledge should be considered, and this is perhaps another avenue for future research.

Conventional IB theories, such as the OLI paradigm and internalization theory, have long sought to answer the question of why DMNCs go for foreign markets, in spite of the presence of the liabilities of foreignness, and focused on their main investment motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations). For this reason, these theories do not adequately capture the primary FDI motivations of EMNCs, and consequently, they are unable to see the big picture when it comes to the FDI phenomenon. Based on this idea, the authors complement the well-known triad motivations (i.e. market-seeking, efficiency-seeking and resource-seeking motivations) by adding the knowledge-seeking motive and contribute to the evolution of IB theories by suggesting a new theory, which is the OILL paradigm.

The study contributes to the extant literature in the field of IB in two key ways. First, it examines EMNCs’ central motivations in conducting FDI where empirical research is sparse. By doing this, this paper attempts to solve the query indicated above (i.e. why MNCs choose FDI in spite of the presence of the liabilities of foreignness), and it offers a new theory (i.e. the OILL paradigm).

The purpose of this paper is to argue for inclusion of evasive foreign direct investment (FDI) into search-based motivation typologies in international business.

Critically reassessing academic literature and using anecdotal evidence, the authors augment the theory of FDI motivation with the concept of evasion.

Evasive FDI is a firm-level response to denial-of-privilege by a state. Divergence of policy environments between home and host prompts relocation or international expansion of productive assets and often the affectation of ‘foreignness’ by the multinational enterprise (MNE). The role of responsibility evasion via FDI is understood in the research literature, mainly because of an emphasis on search-based motives and a failure to distinguish between escape and evasion. International business research is vulnerable to mis-identification of FDI motive which consequently distorts its strategic and policy implications.

The argument for inclusion of evasive FDI serves to augment the established, yet asymmetrically focussed typology of search FDI, demonstrating that evasion is conceptually and analytically distinguishable from search. Further, an augmented typology lends accuracy and insight to research into the reconfiguration strategies of MNEs and legitimation of the international business discipline itself, providing researchers with a more comprehensive account of FDI causation and offering new research paths.

To understand the rationale for foreign direct investment of Chinese electronic companies, their location decisions and entry mode choices

Secondary data on foreign direct investment of the top 100 companies in China’s electronics industry are analysed. The first part covers an exploratory analysis of the industry and the second part presents a comparative longitudinal analysis of three case studies of representative companies: Haier, Huawei, and Lenovo.

The three key findings are: (1) market-seeking is the primary motivation for foreign direct investment of Chinese companies in the electronics industry, yet the strategic-asset-seeking gains importance as the internationalization of the company advances; (2) foreign investment path normally starts at adjacent foreign markets, but more distant markets are gradually targeted and become more important for the company; (3) wholly owned investments are the preferred market entry modes in the international expansion.

This research is based on secondary data, and more in-depth, interview-based studies are needed to explore the perceptions of decision-makers, and a plethora of contextual factors, which result in specific market entry decisions. As only the 100 largest companies were studied, future research should put under scrutiny also internationalization of smaller firms.

Implications of such findings are discussed in the light of classic internationalization theories as well as the current research on internationalization of companies from emerging/developing countries.

Provides an account of foreign direct investment in a context of a substantial and growing importance for the practice of international business, and identifies an agenda for promising future scholarly inquiries.

The purpose of this paper is to analyze and compare the effects of conventional and unconventional FDI on the host country in a more comprehensive and systematic way.

Both the OLI paradigm and the imbalance theory are linked to the diamond model in order to compare the effects of conventional and unconventional FDI on the host country. This methodology is then applied to the real world as a case study, FDI toward the Korean automobile industry.

Conventional FDI is often said to be more beneficial to the host country than the unconventional type. However, the actual effect of unconventional FDI is shown to be more positive with better management and is often larger than perceived. Therefore, unconventional FDI emerges as important as conventional FDI for sustainable economic development.

In general, unconventional FDI has often been criticized severely because of misperceptions derived from the dominance of conventional FDI on theoretical aspects, incomprehensive perspectives toward assessing the effects of FDI, and negative political views. Therefore, rigorous and holistic case study analyses based on solid analytical tools are needed in order to better understand the effects of unconventional FDI and to draw up effective and proper FDI promotion policies.

This paper provides a way to better understand the effect of unconventional FDI on the host country comprehensively and systematically by expanding and deepening existing theories. Based on this, the effects of conventional and unconventional FDI on the host country are compared theoretically and empirically, particularly with the case of the Korean automobile industry.

The main aim of this paper is to verify whether the modern mainstream economic theory of multinational enterprise that explains foreign direct investment (FDI) from developed countries is also able to account for investment decisions of multinational enterprises (MNEs) from emerging economies.

Using Knowledge-And-Physical-Capital (KAPC) model as an analytical framework and Poisson-pseudo maximum likelihood estimation technique, the authors identify determinants of FDI flows from emerging economies. The data set consists of 38 home and 134 host countries during the period 2000–2012. Empirical evidence supports high explanatory power of KAPC model. Further, compared with the earlier Knowledge-Capital (KC) model, results confirm the importance of physical capital.

The estimation results confirm the hypothesis that mainstream economic theory can explain FDI flows from the emerging economies by highlighting the roles of total market size, skilled-labor abundance, investment and trade costs and geographical distance between two countries.

This study casts doubt on the alternative way that the KAPC model suggests to distinguish between horizontal and vertical FDI. The argument that horizontal MNE headquarters would be relatively more abundant than vertical MNE headquarters in countries that are abundant in physical capital relative to skilled labor seems reasonable but the idea of variable specification in the estimated equation should be revised.

Firms should be allowed to move their resources freely into and out of specific activities, both internally and internationally across border. To reach that goal, governments of potential host countries can adopt several measures, most importantly remove restrictions on payments, transfers and capital transactions and open previously closed industries to welcome foreign investment. In addition, to improve investment climate in general, governments need to pay attention to enhancing security of property rights, regulating internal taxation (i.e. corporate income tax), guaranteeing adequacy of infrastructure, efficient functioning of finance and labor markets and fighting against corruption.

The location choice of emerging investors set priority on similarity in economic size, geographical and cultural proximity. It is because shared borders or common official languages would reduce information costs and enhance information flows. Also, investors consider horizontal FDI (with motivation to expand market demand) as one of main modes of entry into a foreign market and a substitute for export. Likewise, distance is often understood as an important investment friction.

The outstanding contribution is that the research has uncovered the positive and statistically significant effect of physical capital on FDI activity, which has not been discussed in the earlier KC model. However, at the same time, the study casts doubt on the KAPC model's argument that relative abundance in physical capital to skilled labor between two countries determines FDI types and suggests that this argument and its empirical model specification should be carefully reviewed.

This paper proposes locational ambidexterity as a location-specific factor based on an operation flexibility perspective, and explores why and how multinational corporations (MNCs) proactively deal with uncertainty by valuing locational ambidexterity in making location decisions.

Location choice data for foreign direct investment (FDI) at a sub-national level in China is used to test the role of locational ambidexterity.

We find that FDI generally prefers locations with high ambidexterity. Moreover, investments from a heterogeneous country context are more sensitive to locational ambidexterity than those from a similar country context. However, there is no significant evidence that wholly owned investments favor locational ambidexterity more than do international joint ventures.

An alternative operationalization of locational ambidexterity may be needed. Future research could explore the sources of locational ambidexterity, identify other firm- and industry-level factors that could alter the value of ambidexterity, investigate how MNCs integrate locational ambidexterity into organization-specific option creation strategies and test the ambidexterity perspective with micro-level location choice data.

Locational ambidexterity may reduce the overall risk and adjustment cost of future changes. FDI may choose a location with high ambidexterity, i.e. a balanced portfolio of location-specific determinants, under uncertainty about the future.

Drawing on the notion of location flexibility from Buckley and Casson (1998), this study identifies a new location character, locational ambidexterity, and proposes that MNCs address uncertainty by choosing ambidextrous locations that offer more flexibility for MNCs to change or respond to potential volatility. Selecting locations with high ambidexterity is thus an alternative and complement to the organization-specific flexibility creation strategies suggested by the literature on real option and flexibility.

This paper investigates the impact of information and communication technology (ICT) on the spatial dispersion of FDI. Using a gravity model, we find that geographic distance remains negative for bilateral FDI activities and ICT advances in source countries have no statistically significant impact on outward FDI. However, ICT advances in host countries have a positive moderating effect on the relationship between distance and FDI. In other words, although ICT does not change the regional orientation of MNEs, it has increased the ability for a country to attract FDI by increasing its attractiveness as an FDI destination in a region.

Research on internationalization of emerging market firms (EMFs) has received an increasing attention in the international management field. A central argument in a majority of these studies is that the internationalization of EMFs is different from that of firms from developed economies, and existing internationalization theories are insufficient to fully explain this new phenomenon. We conduct a critical review of important studies on the internationalization of EMFs to address two related questions. First, is the internationalization of EMFs really a new phenomenon, never been witnessed in the past? Second, does it warrant new theoretical developments? Our review suggests that there are important variations in the internationalization strategies of EMFs and developed economy firms, within EMFs from different emerging economies, and during different time periods. A thorough understanding of motivations, paths, processes, and performances of EMFs does require new theoretical approaches that can take into account the unique aspects of EMFs.