Motives For Foreign Direct Investment Research Articles

The determinants of the use of process control mechanisms in FDI decisions in headquarters–subsidiary relationships

This study investigates the impact of foreign direct investment (FDI) motivations and technological resource commitment on headquarters’ employment of process control over subsidiaries, to better understand the process control mechanisms. Drawing on agency theory and the resource dependence perspective, a cross-sectional data model is developed among the 1541 Taiwanese manufacturing firms engaged in foreign investments, 1015 headquarters–subsidiary (HQ–Sub) relationships in China were selected from the database; in each of these relationships, the headquarters is located in Taiwan, while the subsidiary is located in China. Our findings reveal that the headquarters will use process control if the primary motivation for setting up a subsidiary in a host country is resource-seeking, but not use process control with market-seeking motivation. This control process relationship is enhanced/weakened/weakened by the headquarters’/subsidiaries’/partners’ technological resource commitment. Taiwanese multinational corporations (MNCs) from newly industrialized economies (NIEs) seeking to choose control mechanisms that fit their technological resources and FDI motivations in China are given guidelines. It adds to the use of control mechanisms with HQ-Sub literature. Both resource-seeking and market-seeking motivations shed light on technological resource commitment by various units of an MNC, to ward off information asymmetry.

FOREIGN DIRECT INVESTMENTS IN THE CONDITIONS OF THE COVID-19 PANDEMIC: GEORGIA-EU RELATIONS

Ramin Tsinaridze 
 Email: ramin.tsinaridze@bsu.edu.ge 
 PhD of Business Administration, Associate Professor Batumi Shota Rustaveli State University 
 Georgia, Batumi 
 https://orcid.org/0000-0002-0444-9740
 
 Giorgi Rizhvadze 
 Email:giorgirijvadze@gmail.com 
 PHD student of Business Administration, Batumi Shota Rustaveli State University 
 Georgia, Batumi 
 https://orcid.org/0000-0002-9750-4808
 
 Purpose. Analysis of foreign direct investment motivations and assessment of their impact on Georgia's economy, under the conditions of the COVID-19 pandemic, as well as analysis of Georgia's EU investment relations and determination of future prospects.
 Methodology/approach. The methodological basis of the paper is the fundamental research of economic science. Georgian or foreign language scientific articles, works and studies are used in the research, the material used in the research is based on the data of the Ministry of Finance of Georgia, the Ministry of Economy and Sustainable Development, and the National Statistics Service. Qualitative and statistical methods, data from international organizations are used in the research, this research is mainly based on information collection, comparison, study and analysis.
 Research tasks. The main tasks and hypotheses of the research can be formulated as follows: the effect of the inflow of foreign direct investments on the stability of the exchange rate of the lari, Determination of factors affecting GDP and economic growth.
 Practical value / results. Research results and conclusions can be used in higher education as a guide material. In addition, it will significantly help the government institutions in determining the course of the country's economic development, its adjustment and processing specific issues of realization.

Impacts of the Belt and Road Initiative on regional outward FDI from China based on evidence from 2000 to 2015

Abstract Firms from different provinces in China and their different reactions to the Belt and Road Initiative (BRI) are studied in this research. Initial results from 27.547 outward foreign direct investment (FDI) projects by Chinese firms between 2000 and 2015 regarding the home region profile, host country choice, and FDI motives of the investment firms before and in the early years of the launch of the BRI policy are investigated. The findings show that Chinese firms from eastern provinces that have accumulated a large quantity of inward FDI are more likely than firms from western provinces to switch their investments to BRI-involved countries and engage in a more diverse set of outward FDI motives. These findings help interpret the behavior of Chinese multinationals in the current (de)globalization era, namely using the BRI to circumvent FDI barriers imposed by advanced western economies.

FDI motives and city location preferences in the automotive and commercial banking industries

PurposeCities remain an understudied unit of analysis for understanding the motives of multinational enterprises’ (MNE) foreign direct investment (FDI), with subnational locations in International Business (IB) research to date predominantly captured via the phenomenon of agglomeration. As regional integration projects, such as the European Union and to a lesser degree NAFTA, increasingly reduce the importance of national institutional environments, this paper argues regional and subnational levels become more important for studying MNE location choice. This paper aims to evaluate the explanatory contribution of regional and subnational levels of analysis to understanding MNE location choice.Design/methodology/approachA qualitative deductive bottom-up multiple-case study research design is adopted to study the city location choices and FDI motives of six automotive and six commercial banking companies. These purposefully sampled manufacturing and service MNEs have different home countries and regional orientations. Data on their foreign investments across the extended Triad of Europe, North America and Asia-Pacific were collected for the time period of 2000–2021.FindingsFindings suggest that different classes of city tend to attract specific types of FDI and that these patterns might vary across sectors and be influenced by the regional strategic orientations of MNEs. Industry-specific findings reveal the importance of related and support industries and partners in a city location for the automotive MNEs, while the commercial banks seek investment opportunities in cities that allow acquisition targets that have an attractive customer based and will improve their local market knowledge.Originality/valueThe findings provide evidence in support of MNEs in manufacturing and service industries perceiving the attractiveness of three city types in different ways across the Triad regions.

MNEs, Heterogeneity in Corporate Social Responsibility, and Subsidiary Employment in Host Countries

Building on the theories of CSR and MNEs, this study investigates the relationships between multinational enterprises’ (MNEs’) corporate social responsibility (CSR) commitment and subsidiary employment in host countries. This study theorizes that MNEs’ CSR impacts on overseas subsidiary employment vary by CSR types (social versus environmental); those impacts may be contingent on the MNEs’ firm-level motivations of outbound foreign direct investment (FDI), host country-specific institutions, and geographic orientations in the triad. The empirical findings from a sample of Japanese MNEs’ 11,086 subsidiary-year cases over the period of 2002–2013 are three-fold: (1) it supports the positive relationships between each of social and environmental commitment and subsidiary employment of Japanese MNEs in host countries; (2) the positive effect of social commitment on the subsidiary employment of Japanese MNEs becomes stronger in host countries governed by informal institutions or within the home region of the Japanese MNEs in the triad; and (3) the positive influence of environmental commitment on the subsidiary employment levels is elevated under the Japanese MNEs’ production-seeking outbound FDI motivation or in foreign countries governed by formal institutions. The study concludes with theoretical, empirical, and practical implications to the IB literature.

아세안 해외직접투자 유입 동기유인에 관한 연구: 정태 및 동태적 분석

We examined the motives for inward FDI(Foreign Direct Investment) in ASEAN using static and dynamic analyses. For static analyses, fixed-effect panel analysis and random-effect panel analysis were used through the Hausman test, and for dynamic analyses, System GMM, which uses the lag variable of the differential variable of the FDI as the instruments, was used. In ASEAN 8 developing countries except for Brunei and Singapore which are high-income countries, all of the market-seeking, resource-seeking, efficiency-seeking, and strategic asset-seeking motives have a positive relationship with inward FDI significantly. In dynamic model, two variables which are first lag variable of FDI and market size have a positive relationship with inward FDI significantly. However, resource-seeking and efficiency-seeking variables show a negatively significant relationship with inward FDI. The positive coefficient of two variables in the static analysis were changed to the negative coefficient in the dynamic analysis. Considering time in dynamic models, resource-seeking and efficiency-seeking variables showed different results over time. Unlike previous studies, our study not only used ICT export ratio as a proxy variable for the strategic self-seeking motive, but also conducted both the static analyses and the dynamic analyses on motives of inward FDI in ASEAN.

Bibliometric review on FDI attractiveness factors

This article reviews the literature on foreign direct investment (FDI) attractiveness factors through bibliometric and content analyses. We analyse 499 articles between 1994 and 2021 extracted from the Web of Science database. Using Bibliometrix R-package and VOSviewer software, we combined co-citation, bibliographic coupling, and keyword co-occurrence temporal analysis with a content analysis of the most cited articles. Five main research categories are revealed: structure for FDI, market conditions, entry conditions, institutional framework, and resources offer. We propose a conceptual framework of FDI attractiveness factors aligned with FDI motives. The article comprehensively reviews the key determinants using quantitative and qualitative approaches and provides future research directions.

Tax havens and international business: A conceptual framework of accountability‐avoiding foreign direct investment

AbstractBy taking an objective and scientific bibliometric analysis approach, this paper presents the first review of the extant knowledge base ontax havens. This analysis has guided us in developing an overarching theoretical framework that examines the determinants of the use of tax havens by multinational enterprises (MNEs). Based on our systematic review and theoretical framework, we were able to develop and introduce a new concept, calledaccountability‐avoiding FDI (foreign direct investment), which is distinct from the standard FDI motives identified in the international business (IB) literature. Our review also makes a contribution by explaining how various definitions, measurements, methodologies and categorizations of tax havens can lead to differing and mixed results. Given that the tax haven literature is of a cross‐disciplinary nature, we specifically make a case for how the IB community can make a stronger contribution to our understanding of tax haven activity and its ramifications. We conclude the paper with suggestions for the future research that IB and management scholars could pursue in order to contribute unique insights to the area of MNE strategy and the implications of tax haven investments for countries, various industries and the MNEs themselves.

‘Many Chinas?’ Provincial internationalization and Chinese foreign direct investment in Africa

ABSTRACT Chinese provincial firms are a major and growing source of foreign direct investment (FDI) in Africa, yet there has thus far been little systematic analysis of their motives and behaviour. Based on statistical analysis of a panel of mainland China’s 31 provinces from 2000 to 2015 and a study of three diverse provincial cases, and modifying the classic Organization-Location-Internalization theory of FDI, this article uncovers a three-stage ‘inverted-U’ shaped pathway linking home province internationalization and investment in Africa. Firms from provinces with very low levels of integration in the global economy lack the experience needed to invest in Africa, while those in highly globalized provinces face fewer push factors driving them to (comparatively risky) countries of the developing world. These findings suggest that Chinese provincial FDI in Africa may be driven by a ‘logic of escapism’ alongside conventional FDI motives.

One country, many industries: Heterogeneity of Chinese OFDI motivations at meso level

Research on the stimulants for Chinese Foreign Direct Investment (FDI) is extensive. However most analysis incorporates theoretical models based on the Institution-Based View or, to a lesser extent, the Resource-Based View (RBV). These highlight the importance of the macro (country) and micro (firm) level, while largely ignoring the meso (industry) level. In addition, although investments are known to have several different motivations, stimulated by quite different factors, analysis tends to focus on aggregate FDI flows. We contribute to the literature by proposing an ‘industry-based view’ of FDI which takes account of heterogeneity across industries and FDI motivation. We apply this framework to Chinese OFDI in Europe, differentiating both in terms of investment motivations and sectoral characteristics at (meso) industry level and at (micro) firm level, in home and host countries. Using logistic and multinomial logistic models, our analysis confirms that different types of Chinese FDI (in terms of motivation) are stimulated by different industry-level characteristics in both home and host countries.

Investment Motives in Africa: What Does the Meta-Analytic Review Tell?

Abstract Over the past two decades, Africa has witnessed a dramatic increase in foreign direct investment (FDI) despite a lack of significant changes in infrastructure and the host country’s policies. What are the motives to invest in Africa? How do these investment motives differ for firms from developed and emerging markets? Several studies empirically tested these questions, however, provided inconclusive results. By taking 735 estimates extracted from 51 studies and applying advanced meta-analysis techniques, this study examines the motives of FDI in Africa. We found that compared to market-seeking motive, the effect size of resource seeking and efficiency seeking is larger (smaller) on FDI attractiveness in Africa. In terms of effect size, the impact of asset-seeking motive on FDI is statistically comparable to that of market-seeking motive. Contrary to general perceptions, the impact of natural resources on FDI attractiveness in Africa is not different from market seeking for developed countries’ firms. Our results show that compared to GDP per capita, the effect size of accessing minerals and oil reserves on FDI attractiveness in Africa is positive and significant for global and emerging market firms. Our research shows that there is more likelihood of type I and type II publication selection bias in this research field.

The Role of FDI Motives in the Link between Institutional Distance and Subsidiary Ownership Choice by Emerging Market Multinational Enterprises

AbstractThis study advances the limited generalizability of previous studies that have focused on developed market multinational enterprises and explores the link between institutional distance and ownership choice of emerging market multinational enterprises (EMNEs). Such studies in the EMNE context have been rare, and we provide key theoretical explanations for EMNEs’ distinct foreign direct investment motives to act as important contingencies in the link between institutional distance and EMNEs’ ownership choices. Analyses of longitudinal data of Chinese firms’ internationalization from 2001 to 2017 reveal that the higher the institutional distance, the lower the level of EMNE subsidiary ownership control with market‐seeking motives; while the higher the institutional distance, the higher the level of EMNE subsidiary ownership control with knowledge‐seeking motives.

Chinese firms in developed and developing countries: the alignment of foreign direct investment motives with staffing practices

Chinese firms in developed and developing countries: the alignment of foreign direct investment motives with staffing practices

Macroeconomic Determinants of FDI Decisions in the Automotive Industry: Theoretical Foundations and Empirical Evidence

Purpose - Foreign direct investment (FDI) has seen a tremendous increase over the last years. Decision-making concerning FDI puts great pressure on managers due to their complexity and long-term effects on the companies. Macroeconomic factors increase in their importance when companies go international. This external environment is complex and directly influences the business entity's activities and often decides about the future progress of them. The purpose is to bring more clarity into the specific macroeconomic factors and their impacts on the manager's decision-making process. Also, intervening factors are going to be analyzed if they may attract or distract FDI behavior. Method - Set-up of a new model approach by separating macroeconomic factors within certain characteristics as well as including potential intervening factors such as Incentive Schemes and Risk/Uncertainty as negative and/or positive stimulating factors for FDI decisions. Findings - The conditioned data show that some macroeconomic factors have a strong influence on FDI decisions and often are not considered by the decision-makers as much as they should have been. Incentive schemes for FDI seem to have a strong positive impact on investment decision-makers. Risk/Uncertainty factors have negative impacts. Limitations - The research was conducted on the German and Austrian automotive industry-specific characteristics. The period of FDI ventures was limited to 10 years. Implications - The study underlies the perception of FDI decision-makers in the specific business and environmental conditions of the automotive industry and its supplier organization. The precise definition of the view is important to consider and implies and represents the results of this work. A vice-versa contemplation on the receiving party of FDIs may result in different findings. Originality - Separation of different macroeconomic levels concerning FDI motives to setup a new SEM-model approach. Including intervening factors to get a holistic view of the macroeconomic environment with potential impact on decision-making.

Motivations for Outward FDI from Emerging Economies to Advanced Economies: A Literature Review

Outward Foreign Direct Investment (FDI) from emerging economies in recent years has experienced rapid growth, especially from the BRIC (Brazil, Russia, India, and China) economies. This has gained much attention from international business researchers. The present study assessed the motivations for the outward FDI from emerging economies to advanced economies based on literature review. The paper revealed that market seeking, natural resource seeking, strategic asset seeking, efficiency seeking, and home government support motivate firms from emerging economies to invest in advanced economies. However, efficiency seeking least motivates China’s outward FDI due to its low labour cost. The study also made an evaluation of the existing theories of FDI to determine whether they adequately explain such investments. Based on the evaluation, the OLI Paradigm and the ResourceBased View do not adequately provide a plausible explanation for such investments. However, emerging economies outward FDI to advanced economies seemed to be adequately explained by the Institutional Theory.

Motives for foreign direct investment location in Europe and EU enlargement

European Union (EU) enlargement of the mid-2000s is likely to have changed the motives for foreign direct investment (FDI) location between the existing Member States (the EU15) and the new entrants of Central and Eastern Europe (CEECs), but it is poorly understood. This paper uses the framework of Dunning’s eclectic paradigm and data for 35,105 foreign investments in Europe not only to examine if the motives differ between these, but also how they are affected by the enlargement. Three asset-exploiting motives of market, resource and efficiency seeking are explored using a conditional logit model for the location choice. This is separately for greenfield and brownfield FDI, involving new facilities or jobs, where the latter is efficiency seeking from an expansion or a co-location of functions. The paper finds greenfield FDI in the CEECs seeks an export platform for the EU market and a low-skilled workforce but a national market and higher skills in the EU15. Brownfield FDI differs from this for expansions only, for which the EU market is important, reflecting scale economies. Surprisingly, EU enlargement has a much stronger effect on the FDI location motives in the EU15 by increasing the importance of the European market, which is possibly because the CEEC liberalisation was ongoing throughout the accession process. The paper finds evidence that the differences in the motives between the CEECs and EU15 are narrowing over time, but they are pronounced, and it is argued that they will persist.

FOREIGN DIRECT INVESTMENT TRENDS

The beginning of this century is characterized by deepening globalization and one of the main features of this process is global foreign direct investment flows. The relevance of foreign direct investment as a source of economic growth is inevitable and it has sound theoretical foundation. Despite this fact, many forces shaping the global economy receive a significant amount of attention, but foreign direct investment is often overlooked. Technological progress, trade and foreign direct investment are interrelated. Namely, foreign direct investment has greatly accelerated the spread of innovation and technology, while the technological advances especially in the era of Industry 4.0 have been driving the dynamics of foreign direct investment. Due to expected positive impacts, many countries are continuing policy efforts aimed at attracting foreign direct investment. However, foreign direct investment is experiencing new trends. Over the last few decades the global map of inward and outward foreign direct investment has changed significantly. There are new players with increasing roles in the global foreign direct investment area which are reshaping the world economy. Global foreign direct investment is undergoing a shift as emerging markets countries both inflows and outflows rise dramatically. For example, China’s outbound foreign direct investment has been growing dramatically in recent years, and impacted significant shifts in the global economy. Motives for foreign direct investment, as well as the type are changing due to globalization and new trends, especially high liberalization of trade. The proliferation of global value chains also influenced foreign direct investment trends. One of the examples is necessity of rethinking the framework on motives of foreign direct investment when analyzing emerging market multinational enterprises and their interdependent relationships within global value chains. The contribution of the paper is three-fold. Firstly, the paper gives an overview of key global and regional foreign direct investment trends. Secondly, key factors, as well as potential impacts of these changes are explored. Thirdly, paper offers recommendations for new investment policies.

Motives of foreign multinational firms investing in India: A comparison between manufacturing and services sector

The study aims to determine the principal motives of inward foreign direct investment, by foreign multinational companies, in India. The study also seeks to ascertain if the motives of inward foreign investment of multinational firms differed between the manufacturing sector and the services sector. The paper employed a survey approach, to collect data about the motives and benefits of inward foreign direct investment, in India. Statistical tools, like confirmatory factor analysis, independent sample t-test, were used. The study identified that the market-seeking, resource-seeking, and efficiency-seeking motives differed significantly between the manufacturing sector and service sector firms. However, the study concluded that the strategic asset-seeking motive of foreign direct investment, in India, was not significant.

INFLUENCIA DE LAS EMPRESAS MULTINACIONALES EN LA ACTUALIZACIÓN DE LA INDUSTRIA LOCAL EN GEORGIA

The purpose of this research is to identify the impact of the Foreign Direct Investments motivations in Georgia and to study their influence on the country's economy by considering sector and country characteristics. To assess the impact of foreign direct investment motivation on local economies, the author interviewed companies operating in Georgia in 2009-2016.Then, because the measurement scales used in the survey were mainly binary and ordinary, the author used ProbiT Regression and Ordered ProbiT Regression models. Results obtained from surveys and from analyses using regression equations show that natural resource-seeking companies use local goods and services in their production processes; this is expressed in their linkages with local suppliers and distributors. Conclusions are that foreign direct investments in Georgia have no significant influence on the development of local organizations and innovations. Although the Georgian market is small and the population is quite poor, market-seeking foreign direct investment is predominant. Multinational Enterprises that are directly engaged in foreign investments in Georgia (except for natural resources-seeking foreign direct investments), are rarely integrated with local markets.

How do technical barriers to trade affect foreign direct investment? Tariff jumping versus regulation haven hypotheses

Trade liberalisation and the EU enlargement over the past two decades has allowed European multinational enterprises (MNEs) to benefit from production fragmentation in Central, East and Southeast Europe (CESEE). Technical Barriers to Trade (TBTs) might induce costs of certification, inspection and compliance at the border that encourage MNEs to undertake foreign direct investment (FDI) in the host market instead of exporting to that market. However, overregulation and stringency of standards that are embedded within these TBTs might discourage FDI in a given market. The former shows the intuition behind ‘tariff jumping’ motives, while the latter is based on the ‘regulation haven hypothesis’. These two opposing hypotheses are tested in this article by analysing the impact of TBTs imposed by both home and host countries on inward FDI stocks in the CESEE host countries during the period 1996–2016. The results hint at ‘tariff jumping’ motives of FDI in these countries. This is more evident for discriminative TBTs imposed by the host economy on which the home country raised Specific Trade Concerns (STC) at the World Trade Organization (WTO).