Egypt and the investment development path

Abstract

PurposeAims to analyze the process of internationalization of multinational corporations from emerging economies, and more broadly test the investment development path (IDP) hypothesis for Egypt.Design/methodology/approachA combination of data analysis and company case studies to assess to what extent and how Egyptian companies are internationalizing. The theoretical background is the IDP hypothesis, according to which the net outward investment position of a country depends on its level of development.FindingsThe paper highlights how poor investment climate and broader geopolitical motives receive limited foreign direct investment (FDI) inflows, while outward FDI limited in size and scope. Despite this climate, the two multinational corporations have successfully expanded abroad, following different strategies.Research limitations/implicationsData limitations and the limited size of outward FDI prevent a statistical testing of the IDP hypothesis, for example, by regressing the net FDI position on GDP, utilizing a quadratic specification to allow for the non‐linearity in the relationship.Practical implicationsThe paper concludes by pointing to the importance of promoting corporate internationalization throughout an active policy to make the business environment more conducive to risk‐taking, instead of rent‐seeking, behaviours.Originality/valueThis paper covers Egypt, an under‐researched country in an under‐researched area (North Africa).