Financial Foreign Direct Investment: The Role of Private Equity Investments in the Globalization of Firms from Emerging Markets

21 Pages Posted: 7 Aug 2008

See all articles by Tamir Agmon

Tamir Agmon

Tel Aviv University, Faculty of Management

Avi Messica

The College of Management

Date Written: April 13, 2008

Abstract

One major change in the world of international business and finance is the growing role of private equity investments in firms in emerging markets. In little more then four years, since 2003, the money raised by international, primarily American private equity funds for investment in emerging markets went up about ten times, from $3.5B to $35B.

This paper provides a multidimensional analysis and discussion on the role of private equity funds in the globalization process of firms from emerging markets. The discussion begins with development economics, focusing on financial markets development and sector specific capital, proceeds to a discussion of local comparative advantage and intangible trade costs in the process of globalization, and continues with a discussion of imperfect contracts and financial contracting based on recent research in financial economics.

The multidimensional character of the research is congruent with the nature of globalization and international business. Investment of private equity funds in emerging markets is shown as a new form of foreign direct investment dubbed FFDI (financial foreign direct investment).

Keywords: Emerging markets, financial markets development, FDI, globalization

JEL Classification: F00, F12, F21, G24, O19, O38, P45

Suggested Citation

Agmon, Tamir and Messica, Avi, Financial Foreign Direct Investment: The Role of Private Equity Investments in the Globalization of Firms from Emerging Markets (April 13, 2008). Available at SSRN: https://ssrn.com/abstract=1210102 or http://dx.doi.org/10.2139/ssrn.1210102

Tamir Agmon

Tel Aviv University, Faculty of Management

Ramat Aviv
Tel Aviv
Israel
+972504896333 (Phone)

Avi Messica (Contact Author)

The College of Management ( email )

7 Yitzhak Rabin Blvd.
P.O.B 25073
Rishon Lezion 75190, 75190
Israel
+972-3-963-4013 (Phone)
+972-3-963-5776 (Fax)

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