Why Do Firms Invest Abroad? An Analysis of the Motives Underlying Foreign Direct Investments

29 Pages Posted: 13 Oct 2008 Last revised: 3 Jun 2009

See all articles by Chiara Franco

Chiara Franco

University of Pisa

Francesco Rentocchini

Southampton Business School, University of Southampton

Giuseppe Vittucci Marzetti

University of Milano-Bicocca - Department of Sociology and Social Research

Multiple version iconThere are 2 versions of this paper

Date Written: December 15, 2008

Abstract

Although FDI have been at the forefront of economic debate since a long time, economists have not yet developed a unified framework for their investigation. In this paper, we put forward the idea that an essential point to analyze FDI concerns their underpinning motives. Motives are at the core of FDI and FDI are only but one of different alternative means for firms to grasp an opportunity in a foreign country. We discuss the factors that shape the set of available alternatives and analyze those affecting the decision to engage in FDI (internalisation determinants), along with those influencing their localisation (localisation determinants). Starting from Dunning (1993) we put forward a revised taxonomy of FDI motives consistent with this framework - resource seeking, market seeking and non-marketable asset seeking. In order to show its practical implications, we survey common empirical issues on FDI showing how our analysis can shed light on seemingly contradictory empirical results.

Keywords: FDI determinants, FDI motives, Taxonomy, Foreign Direct Investments

JEL Classification: F210, F230, L230, L240

Suggested Citation

Franco, Chiara and Rentocchini, Francesco and Vittucci Marzetti, Giuseppe, Why Do Firms Invest Abroad? An Analysis of the Motives Underlying Foreign Direct Investments (December 15, 2008). Available at SSRN: https://ssrn.com/abstract=1283573 or http://dx.doi.org/10.2139/ssrn.1283573

Chiara Franco

University of Pisa ( email )

Via Serafini 3
56126 Pisa
Italy

Francesco Rentocchini

Southampton Business School, University of Southampton ( email )

University Rd.
Southampton SO17 1BJ, Hampshire SO17 1LP
United Kingdom

Giuseppe Vittucci Marzetti (Contact Author)

University of Milano-Bicocca - Department of Sociology and Social Research ( email )

via Bicocca degli Arcimboldi, 8
Milano, MI 20126
Italy

HOME PAGE: http://https://www.unimib.it/giuseppe-vittucci-marzetti

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