The Rise of Transnational Corporations from Emerging Markets
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The Rise of Transnational Corporations from Emerging Markets

Threat or Opportunity?

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.
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Chapter 5: Do Firms from Emerging Markets have to Invest Abroad? Outward FDI and the Competitiveness of Firms

John Cantwell and Helena Barnard


5. Do firms from emerging markets have to invest abroad? Outward FDI and the competitiveness of firms John Cantwell and Helena Barnard INTRODUCTION In the field of international business, a broad consensus has been reached that, although not every instance of inward foreign direct investment (IFDI) necessarily benefits developing countries, in most cases IFDI acts as a useful source of jobs, capital and especially new knowledge and technology. However, there is little academic work on the relationship between development and outward FDI (OFDI) from developing countries, especially when such FDI involves relocation to the developed world. Should it be seen as institutionalized capital flight, fundamentally an expression of negative sentiment, or is OFDI a potentially positive development that may serve to increase the competitiveness of the investing firm, and eventually its home country? The emergence and now persistence of the phenomenon of developingcountry firms investing abroad suggests that OFDI benefits at least the individual firm. If firms do not benefit from international expansion, they are unlikely to continue (not to mention extend) their efforts abroad. In most cases, OFDI confers net benefits to the investing enterprise in the form of improved access to markets, resources and knowledge. However, the benefits that firms derive from their FDI may not be immediately apparent, and may even sometimes seem counterintuitive in terms of the immediate net advantages. Thus, a firm from a less-developed country may engage in FDI in the developed world in order to build a...

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