Internationalization, Sustainability, and Capacity-based Motives of Foreign Direct Investment: A Conceptual Framework

Abstract

Researchers have studied foreign direct investment (FDI) from various perspectives, and noted the motives of FDI depend predominantly on disadvantages in home countries or advantages in host countries. However, little is known about how investors avail themselves of such advantages. The purpose of this chapter is to offer guidelines to investors to make effective FDI decisions and maintain sustainable international expansions in the post-pandemic era. Via a conceptual review of the extant literature, the authors elaborate on the motives of FDI from the perspective of the capacities of investors and provide a nuanced understanding of how they can make better investment decisions based on both the lacks and capacities. The authors develop a framework elucidating that the motives of FDI can be determined by a firm's level of technology and absorptive capacity. The framework will help investors to find cross-border partners to collaborate with, increase resilience, and deal with post-pandemic recovery.