A retrospective on: Infrastructure or foreign direct investment?

Abstract

Abstract Purpose This chapter revisits the paper by Yamin and Sinkovics (2009) on the paradoxical relationship between MNE current strategies and economic development. There is evidence that positive developmental impacts of FDI flows are conditional on high levels of human capital and thus on the existence of ‘good’ infrastructure in recipient countries. Design/methodology/approach The chapter makes a conceptual contribution and critically evaluates the key points made in the Yamin and Sinkovics (2009) paper. Findings The build-up of infrastructure and enhancement of domestic capabilities are important underpinnings of sustainable development. ‘Good’ infrastructure, especially basic social infrastructure, is the rock on which otherwise marginalised individuals, groups and country governments can build capabilities. Research implications The chapter draws attention to the ‘prisoner dilemma’ nature of the relationship between MNEs and host governments. Dominant MNE strategies in LDCs create a low payoff for both parties. To proceed towards mutually beneficial outcomes in the MNE–LDC relationship, credible and sustained co-operation between the parties are necessary. Research in the area of mutual value creation has only just emerged in the domain of IB. Practical implications Progressing towards ‘sustainability’ requires that MNE managers are advised to develop a global capability in ‘social embeddedness’. LDCs have great potential of becoming strategic markets and important sites for new product and service development. To pursue these opportunities requires credible and sustained commitment to mutual value creation. Originality/value This chapter shows that the relationship between MNE strategies and economic development is a contested one. The paper by Yamin and Sinkovics (2009) was one of the first in the domain of IB to suggest that developmental impacts of FDI are contingent on the existence of good infrastructure in recipient countries.