Threat or Opportunity?
- Studies in International Investment series
Edited by Karl P. Sauvant
Chapter 5: Do Firms from Emerging Markets have to Invest Abroad? Outward FDI and the Competitiveness of Firms
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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