Do we need a special theory of foreign direct investment for extractive industries?

Abstract

Purpose – The purpose of this paper is to examine the extent to which we require a special theory of foreign direct investment (FDI) for extractive industries.Design/methodology/approach – The paper examines the general theory of FDI using internalising theory and location theory and augments this by using special features that apply to the extractive industries including the obsolescing bargaining argument.Findings – The paper shows that a special theory is clearly required to explain the particular circumstances of extractive industries. However, the received theory relying on internalisation and location elements performs well.Practical implications – Despite the current issues around extractive industries and its peculiarities, analysis of the reasons for FDI (including Chinese FDI) remains explicable by standard theory.Originality/value – FDI in the extractive industry provides a good test of the general theory of FDI and a special theory nested within this gives a great deal of insight into current ...