Internationalization of Firms from Emerging Markets: Location Choice and the Impact of Institutions and State Ownership

Abstract

Since its early days in the 1960s, the literature on foreign direct investment (FDI) has always sought to understand and explain observed phenomena (Caves, 1996; Dunning, 1980,1998). Between the 1960s and 1990s, most actual FDI took the form of the creation of subsidiaries by American firms in Europe, or European firms in America. From the 1970s, investments by Japanese firms in both America and Europe also became significant (Yang et al., 2009). This might all be regarded as ‘north-north’ investments; and the theorizing to explain it focused on ‘ownership advantages’ (Dunning, 1980) of source firms, often based around technology or brands, or firm specific advantages (Rugman, 1982) that can be developed by careful corporate strategy. Even in this period, of course, there was also FDI, for example, between firms based in developed and less developed economies — ‘north-south’ investments — to exploit natural resources; captured by Dunning as resource seeking as a motivation for FDI (Dunning, 1980). However, the period between 1990 and 2008 saw increasing movements of FDI between developed and developing countries and for motives including efficiency seeking and market seeking. This was the era of emphasis on ‘emerging markets’, where growth and development was seen to be concentrated in a small group of countries termed the BRICs (Brazil, Russia, India, China) by Goldman Sachs economist Jim O’Neill (O’Neill, 2012).