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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...