The Complementarity of Foreign and Domestic Investment by Emerging Market Multinationals

Pananond, P. and Cuervo-Cazurra, A. 2018. The complementarity of foreign and domestic investment by emerging market multinationals. In Castellani, D., Narula, R., Nguyen, Q., Surdu, I. and Walker, J. (Eds) 2018. Contemporary Issues in International Business: Institutions, Strategy and Performance. P

17 Pages Posted: 27 Dec 2018

See all articles by Pavida Pananond

Pavida Pananond

Thammasat University

Alvaro Cuervo-Cazurra

Northeastern University - Department of International Business and Strategy

Date Written: August 2, 2017

Abstract

We analyse the impact of foreign direct investment on domestic investment by emerging market firms. This relationship underlies a key policy debate on whether and how home-country governments should support outward foreign direct investment. While some governments are strongly in favour of supporting their firms’ overseas expansion, many are hesitant as outward foreign investment is considered to replace domestic investment and thus harmful for the home economy. We argue that emerging market firms’ foreign expansion complements rather than substitutes their domestic investment because foreign direct investment enables these firms to increase their efficiency and improve their value chain positioning.

The ability to arbitrage different home and host countries’ comparative advantages improve the efficiency and sophistication of home operations, ultimately contributing to further domestic investment and growth.

Keywords: Outward foreign direct investment, domestic investment, emerging economies, industrial policy, economic development, global value chains, upgrading

JEL Classification: F23

Suggested Citation

Pananond, Pavida and Cuervo-Cazurra, Alvaro, The Complementarity of Foreign and Domestic Investment by Emerging Market Multinationals (August 2, 2017). Pananond, P. and Cuervo-Cazurra, A. 2018. The complementarity of foreign and domestic investment by emerging market multinationals. In Castellani, D., Narula, R., Nguyen, Q., Surdu, I. and Walker, J. (Eds) 2018. Contemporary Issues in International Business: Institutions, Strategy and Performance. P. Available at SSRN: https://ssrn.com/abstract=3298376

Pavida Pananond

Thammasat University ( email )

Bangkok, 10200
Thailand

Alvaro Cuervo-Cazurra (Contact Author)

Northeastern University - Department of International Business and Strategy ( email )

D'Amore-McKim School of Business
313 Hayden Hall, 360 Huntington Avenue
Boston, MA 02115
United States
16173736568 (Phone)
16173738628 (Fax)

HOME PAGE: http://cuervo-cazurra.com

Register to save articles to
your library

Register

Paper statistics

Downloads
6
Abstract Views
84
PlumX Metrics