Outward Fdi From Emerging Economies Versus Outward Fdi From Advanced Industrial Countries

1351 words - 6 pages

Implications for strategies of MNCs in emerging economies
Only a few studies have found a firm’s resources to act as location determinant. For instance, such resources have been found to influence the sub-national location choices of overseas firms investing with asset-seeking strategies in the USA (Alcacer, 2006; Jain Hausknecht & et al., 2013). As Dunning (2009; Jain Hausknecht & et al., 2013) observed, location is now a more complex decision than the one proposed in the international process (IP) model. Single factor theories do not always offer a sufficient response to the possible variations in causal factors.

Marinov & Marinova (2012) argues that to support organizations in making ...view middle of the document...

Emerging MNCs develop significant ownership advantages that they exploit when investing abroad in similar economies based on their capability to deal with institutional voids in their home countries (Khanna and Palepu 2006; Ramamurti 2009; Stoian, 2013). To ensure the protection of firms’ know-how and ownership advantages, Cavusgil, Ghauri & et al. (2013) discover that firms from EEs will often choose Greenfield investment methods when investing in similar economies, while prioritizing M&A transactions when investing in developed economies.

As Foreign Direct Investment (FDI) has been one of the most widespread forms of international economic activity in recent years (Karabay, 2010), FDI has also become a major topic in international business research area, Chuang (2001) states that many studies use measures of foreign presence to explain FDI’s effect, research into firm-level FDI topics suggests many potential important traits of FDI flows. As outward FDI from emerging economies has growing rapidly in past two decades, researchers have focused on studies of traits of FDI from emerging economies, tried to examine how economies influence FDI. By using Resource-based View and Institution-based View, this essay examines differences between outward FDI from EEs and AEs and their possible effects, and differences range from technology exploration and technology exploitation rationale to institutional and cultural distance which leads to MNCs location and entry mode preference. However, the essay’s evidences are mainly from literature in analyzing the difference, and mainly focus on Chinese outward FDI as example in identifying traits of FDI from emerging economies, since according to UNCTAD China became the world’s third-largest investor last year after the U.S. and Japan in 2011 (Chen and Dhara, 2013,). To thoroughly demonstrate differences between outward FDI from EEs and AEs and their possible effects in coping with firms’ heterogeneity, or identify EEs MNCs-specific FDI theories, more quantitative and qualitative study is needed in further research.

Works Cited

Aggarwal, R. & Pradhan, P.J. 2010, “On the Globalness of Emerging Multinationals: A Study of Indian MNEs”,
[online] Available from: http://mpra.ub.uni-muenchen.de/24867/ (Accessed: 21/02/2014)

Amighini, A., Sanfilippo, M. & Rabellotti, R. 2013, "China’s Outward FDI: An Industry-Level Analysis of Host-Country Determinants", Frontiers of Economics in China, vol. 8, no. 3, pp. 309.

Cavusgil, S.T., Ghauri, P.N. & Akcal, A.A. 2013, Doing business in emerging markets / S. Tamer Cavusgil, Pervez N. Ghauri and Ayse Akcal, Los Angeles ; SAGE, 2013; 2nd ed. pp. 129

Chen S. and Dhara T. 2013, “Emerging Markets FDI Inflows Top Advanced Nations for First Time” [online] Available from: http://www.bloomberg.com/news/2013-06-26/emerging-markets-fdi-inflows-top-advanced-nations-for-first-time.html (accessed 21/02/2014)

Chung, W. 2001, "Mode, size, and location of foreign direct...

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