Outward FDI and Domestic Employment Growth: A Penrosean Coordination Challenges Framework

Abstract

Research to date has only rarely studied firm-specific reasons that influence how multinational enterprises grow employment in their home country after they make a foreign direct investment (FDI). We apply a Penrosean perspective to understand post-investment coordination challenges and develop novel theory about the domestic employment effects of the FDI’s relative size. Specifically, we argue that MNEs’ home-country employment growth is greater for relatively larger projects because of constraints in human resources who can attend to an increased amount of coordination challenges. Further, we suggest that MNEs’ establishment-mode choice, their regional orientation, and their degree of state ownership co-shape that relationship. We find support for our hypotheses analyzing 409 projects by MNEs from 13 countries.