Patterns of foreign direct investment by large New Zealand firms

Abstract

Introduction Environmental factors such as government policy. location of the home country firm, and industry mix have a direct impact on the internationalization of the firm. The impact of these factors is particularly significant in the case of firms in the New Zealand economy. New Zealand is a “late” internationalizing country. As a small economy, highly dependent on overseas trade earnings. New Zealand firms have serviced their markets principally through exportin, (7 modcs, using overseas agents and distributors. Use of other forms of market servicing, such as foreign direct investment (FDI). has been inhibited by the impact of factors relating to govcrnmcnt policy, lOCilti0fl and industry mix. Kccont economic reforms and structural adjustment in New Zei~l~~nd have resulted in iI changing pattern of international activity for SOIIIC ol’ NCW Zealand’s larger firms, in particular the use of FDI as ;L market entry mode. The ohjcctivc of this paper is to report on iln on-going longitudin:~l study of the FDI of the New Ze;ililnd firm. The initial phase of the resenrch covers the period 19X4-1987. Subsequent research which updates the activities 01 firms in the study wils undertaken between 19X7-1992. Little has been written on the New Zealand firm experience, although some work has been done at the aggrt,‘ *~~‘~te and industry level. albeit from ;I different perspective. (Britton, 1991; Le Heron, 1990). The nature of the discussion therefore is preliminary. and the conclusions tentative, as the patterns of international activity are only just emerging. It is also the result of inconsistent and often incomplete data. which is available to describe these relatively recent phenomena. The first section of this paper develops a theoretical framework for the pattern of FDI activity by the New Zealand firm. The second section documents the background to FDI activity.by New Zealand firms. The third section describes the patterns of international activity and characteristics of FDI by ;1 small sample of eight firms in four different industry sectors. The small size of the sample is due to the relatively small number of firms who have undertaken FDI since the starting date of the study, 1984. and the small number of larger firms in the New Zealand economy. The data has been drawn from published sources. company annual reports and interviews with Patterns of Foreign Direct Investment