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Conventional foreign direct investment (FDI) theories regard FDIs as strategic moves based on operational or industrial organization considerations. We demonstrate that financial factors are also important in corporate FDI decisions. The financial factors concern internal capital market strength and corporate governance and include exchange rate changes, internal and external financing cost, risk diversification, and agency costs. There is variability in the significance of financial variables depending on industries and destinations. The integrated model with both strategic and financial factors is superior to either component model in explaining FDIs. However, financial factors are no less important in explaining the prevailing FDI phenomena than strategic or operational variables.

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.

In this chapter I would like to recall how I got started on my research on the multinational enterprise (MNE) and outline how my thinking on this important economic institution has evolved through the years.11I thank Sondra Grace of Gracefully Put for editing this manuscript.

Why is it that, despite repeated claims that digital-content firms and internet-based businesses can internationalize everywhere almost instantly, many seem unable to profitably expand outside their home markets? Why have emerging market firms (EMNEs) caught up with established developed-country multinationals (DMNEs) so much faster than expected? In this chapter, the author argues that the clue to these two puzzles lies in the realization that, contrary to the dominant view in the international business (IB) literature that focuses only on the intangibles exploited by DMNEs and assumes that these firms are free to unilaterally decide on their mode of entry and operation, doing business in a foreign country is only possible if intangibles are bundled with complementary local resources, usually held by local firms. Taking into account these complementary local resources and their owners makes it clear that DMNEs are not always free to choose their entry mode but must enlist the cooperation of local resource owners. The need of digital-content and internet-based firms for local complementary resources also explains why they sometimes experience problems when expanding abroad. Lastly, control of complementary local resources provides EMNEs with a home advantage against DMNEs competing with them in their home market. The author shows how EMNEs can capitalize on this advantage to obtain the intangibles they lack and need. The fact that these advantages are available on efficient global markets, while complementary local resources are not, explains the surprising speed of EMNE catch-up.

International business theory leans heavily on neoclassical economics, ignoring its unrealistic assumptions and the many changes in the environment. The chapter calls for a revision of the theory to a contingency theory. The major contingent elements analysed are the political system, business–government and NGOs relations, industries, regimes, ownership patterns, the degree of reliance on ethical behaviour, the institutional environment and social norms.

This paper points out new directions for the deepening and broadening of the institution-based view, by drawing on three streams of research with which I have been involved recently: (1) outward foreign direct investment from emerging economies, (2) bankruptcy laws and entrepreneurship development, and (3) institution-based research focusing on Africa. Such deepening has been accomplished by enhancing our institution-based understanding of foreign direct investment with a focus on emerging multinationals, while broadening has been done both substantively by probing into the impact of bankruptcy laws on entrepreneurship development around the world and geographically by calling for enhanced research attention on Africa via an institution-based lens.

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.

In this chapter, we document the growing importance of FDI from BRIC countries in relation to FDI from both developed and developing countries and investigate the types of firms that are responsible for BRIC FDI.

We follow a two-step empirical approach. First, we provide macro evidence on FDI from BRIC countries. We use UNCTAD data to highlight the patterns of FDI flows and stocks. Second, we provide firm-level evidence on FDI. Using ORBIS data, we elaborate a rich taxonomy of FDI that accounts for the decision to invest abroad and for the location, ownership, and number of foreign subsidiaries. Thus, we characterize BRIC multinationals’ involvement in FDI and examine the relationship between FDI and performance at the firm level.

We unveil new facts about BRIC multinationals. BRIC multinationals are in the minority in their home countries, but they outperform domestic enterprises. Within the group of BRIC investors, those firms that invest in developing countries, that operate in joint ventures, or that have more than five foreign subsidiaries are in the minority, but they outperform those firms that select other FDI strategies.

Our estimates document a positive and robust correlation between FDI and performance; however, the cross-sectional nature of our data does not permit a proper causality analysis.

Our work contributes to the International Economics literature on internationalization and firm performance as well as to the International Business literature on FDI from emerging economies. With respect to the former, we innovate by studying the relation between FDI strategies and firm performance. In relation to the latter, we innovate by introducing firm-level data and a cross-country approach that lets us illustrate the roles and features of FDI from BRIC countries.