Towards a more comprehensive assessment of FDI’s societal impact

Abstract

Societal actors increasingly expect multinational enterprises (MNEs) to positively impact the host countries in which they operate. While these expectations have prompted IB scholars to engage more extensively with the societal impacts of foreign direct investment (FDI), our collective knowledge of these impacts is limited. Early IB literature investigated FDI’s aggregate impact but generally confined the scope to economic effects. Contemporary, strategy-oriented IB scholarship broadened the scope of impact types to include social and ecological effects, yet mostly limited the scope of the impacted actors to MNEs themselves. We argue that IB research should more comprehensively assess FDI’s impact by incorporating social and ecological effects in addition to economic ones, and by accounting for a broader set of stakeholders beyond MNEs. IB scholars should challenge the assumption that FDI’s economic impacts spill over to positive societal outcomes, and that MNEs’ interests parallel those of host countries. A more comprehensive assessment will require IB scholars to question “win–win” assumptions about the complementarity of corporate societal and financial performance, examine FDI’s societal impact over longer time horizons, leverage innovative approaches from allied sciences, and consider interactions between different types of societal effects in order to appreciate their sometimes countervailing effects.