On the Treatment of Finance-Specific Factors Within the OLI Paradigm

International Business Review, Vol. 10, No. 4, 2001

31 Pages Posted: 30 Aug 2007

See all articles by Lars Oxelheim

Lars Oxelheim

Research Institute of Industrial Economics (IFN); University of Agder; Lund University

Trond Randøy

University of Agder - School of Management

Arthur I. Stonehill

affiliation not provided to SSRN

Abstract

This article argues that the body of foreign direct investment (FDI) literature in general and the ownership, location, and internalization (OLI) paradigm in particular would be enriched if finance-specific factors are explicitly incorporated as drivers of FDI. We suggest that financial strategies involving factors such as debt/equity swaps or equity-listings in foreign equity markets affect the firm's relative cost and availability of capital, and motivate a firm's engagement in FDI. Large, research-intensive firms, predominantly resident in the US, UK, Japan or other liquid markets, have in the literature been identified as typical prototypes of MNEs undertaking FDI. These firms are assumed to have no restrictions as regards their ability to achieve a competitive cost and availability of capital, a focus that has made financial capabilities and resources less of an issue in FDI research. Our article mitigates this by emphasizing the relevance of finance-specific proactive strategies for FDI to occur. We generate eight testable hypotheses based on the recognition of finance-specific factors as active drivers of value creating FDI.

Keywords: FDI, Cost of Capital, Financial Strategies, OLI

JEL Classification: F21, F23, G34, M21

Suggested Citation

Oxelheim, Lars and Randøy, Trond and Stonehill, Arthur I., On the Treatment of Finance-Specific Factors Within the OLI Paradigm. International Business Review, Vol. 10, No. 4, 2001, Available at SSRN: https://ssrn.com/abstract=1010660

Lars Oxelheim (Contact Author)

Research Institute of Industrial Economics (IFN) ( email )

P.O. Box 55665
SE-10215 Stockholm
Sweden
+46 8 665 4527 (Phone)
+46 8 665 4599 (Fax)

University of Agder ( email )

Serviceboks 422
N-4604 Kristiansand, VEST AGDER 4604
Norway

Lund University ( email )

P.O.Box 7080
S-220 07 Lund
Sweden
+46462228744 (Phone)

Trond Randøy

University of Agder - School of Management ( email )

Adger Research Foundation
Serviceboks 422 Bygg H
N-4604 Kristiansand
Norway
47 3814 1027 (Phone)

Arthur I. Stonehill

affiliation not provided to SSRN ( email )

No Address Available

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