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The Rise of Transnational Corporations from Emerging Markets

The Rise of Transnational Corporations from Emerging Markets

Threat or Opportunity?

Studies in International Investment series

Edited by Karl P. Sauvant

This insightful book shows that foreign direct investment (FDI) from emerging markets has grown from negligible amounts in the early 1980s to $210 billion in 2007, with the stock of investment now being well over $1 trillion. This reflects the rise of firms from these economies to become important players in the world FDI market. The contributors to this book comprehensively analyze the rise of emerging market TNCs, the salient features of the transnational activities of these firms, the relationship of outward FDI and the competitiveness of the firms involved, their impact on host and home countries and implications for the international law and policy system.

Chapter 12: Outward FDI and the Economic Performance of Emerging Markets

Steven Globerman and Daniel M. Shapiro

Subjects: business and management, international business


Steven Globerman and Daniel M. Shapiro INTRODUCTION A fairly substantial literature exists that evaluates the impacts of outward foreign direct investment (OFDI) on home countries.1 The emphasis of the relevant studies has been on OFDI from developed countries, reflecting the historic propensity for OFDI to be undertaken by transnational corporations (TNCs) headquartered in those countries. However, OFDI from emerging markets has been growing in both absolute and relative importance in recent years. As a result, researchers and policy makers are paying increasing attention to OFDI by TNCs headquartered in emerging markets, particularly those from Brazil, China, India, and Russia (the so-called BRICs ).2 Nevertheless, there is relatively little published research on the home country impacts of OFDI for emerging economies. Studies for developed home economies focus on a wide range of potential economic impacts of OFDI, including impacts on domestic employment, wages, expenditures on research and development and innovation, trade flows and tax revenues (Kokko 2006). While there is some conflicting evidence, the broad conclusion to be drawn from the relevant studies for developed countries is that OFDI is associated with net productivity benefits to the home country that are manifested in higher per capita real income levels.3 The evidence suggests that the productivity benefits of OFDI are achieved primarily through efficiency gains tied to the specialization and scale advantages of firms competing in international markets, and the indirect importation of knowledge and technology through imports and internal spillovers. In this sense, OFDI benefits...

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