Patterns and Determinants of Foreign Direct Investment in Newly-Opened Economies: The Case of Argentina

Abstract

Following dramatic macroeconomic changes in 1991, the whole Argentine economy was deeply transformed at the microeconomic level. Central to this transformation was the inflow of foreign capital, in the form of mergers, acquisitions, joint ventures, greenfield investments, strategic alliances, and sheer expansion. There has been little systematic attempts to map this important phenomenon, which has changed the way of doing business in Argentina. The main goals of this paper are: (a) to propose a model of the micro-economic transformation of a newly opened economy; (b) to briefly map the private foreign direct investment (PFDI) process in the economy; and (c) to propose a comprehensive explanatory model of the location of a home-country foreign direct investment (FDI) into an emerging economy, highlighting the role of experience in such decision. An empirical survey structure consisting of a cross-sectional, time-series method (panel) is proposed, and preliminary results are discussed. Potential implications for managers and policymakers are explored in the last section; these may be useful to predict corporate multinational behavior in other big emerging markets like Brazil, which are currently undergoing similar macro-micro changes.