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Home government policies for outward FDI from emerging economies: lessons from Asia

Rajah Rasiah (Faculty of Economics and Administration, University of Malaya, Kuala Lumpur, Malaysia)
Peter Gammeltoft (Department of International Economics and Management, Copenhagen Business School, Frederiksberg, Denmark)
Yang Jiang (Copenhagen Business School, Asia Research Centre, Frederiksberg, Denmark)

International Journal of Emerging Markets

ISSN: 1746-8809

Article publication date: 6 July 2010

9121

Abstract

Purpose

The purpose of this paper is to examine the drivers of outward foreign direct investment (OFDI) from the emerging economies and if there exists a positive role for home governments to coordinate them. The backdrop is the recent increases in OFDI from emerging economies and the emergence of several emerging economy firms, which have caught up to become global leaders in several industries. The paper focuses particularly on experiences from Asian economies.

Design/methodology/approach

The paper applies a multi method approach and relies on literature studies, investment statistics, government reports, press reports, company reports, and interviews with public officials.

Findings

Extending the motive‐based business theory, the paper first establishes the pronouncement of a third wave of OFDI from the mid‐1990s. Whereas the typical motives have remained important, the technology‐seeking motive has become significantly more important during the third wave. Typical policy prescriptions to liberalize government regulations have been called into question. Many home emerging country governments have acted to coordinate their activities by regulating proactively investment outflows. The evidence also shows that the successful investment outflows have benefited significantly from home governments addressing the characteristics and motives of target industries and locations abroad.

Practical implications

The analysis shows that contrary to mainstream prescriptions many home governments have successfully regulated strongly OFDI from the emerging economies. However, it is important for home governments to consider the broader interest of promoting capital flows to ensure the long‐term development of economies rather than narrow national interests. Home and host governments should seek to establish common and specific collaboration platforms to raise information flows and coordinate better the negotiations and execution of investment projects.

Originality/value

The paper provides a more thorough analysis of the implications for home country policies of the increasing outward investment flows from emerging economies and the increasing competitiveness and capabilities of their transnational firms. It proposes augmentations to prior frameworks of drivers and motives of OFDI and pushes deeper the home policy implications of increasing outward investment flows.

Keywords

Citation

Rasiah, R., Gammeltoft, P. and Jiang, Y. (2010), "Home government policies for outward FDI from emerging economies: lessons from Asia", International Journal of Emerging Markets, Vol. 5 No. 3/4, pp. 333-357. https://doi.org/10.1108/17468801011058415

Publisher

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Emerald Group Publishing Limited

Copyright © 2010, Emerald Group Publishing Limited

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