Do we need a special theory of foreign direct investment for extractive industries?

Abstract

Purpose

The purpose of this paper is to examine the extent to which we require a special theory of foreign direct investment (FDI) for extractive industries.

Design/methodology/approach

The paper examines the general theory of FDI using internalising theory and location theory and augments this by using special features that apply to the extractive industries including the obsolescing bargaining argument.

Findings

The paper shows that a special theory is clearly required to explain the particular circumstances of extractive industries. However, the received theory relying on internalisation and location elements performs well.

Practical implications

Despite the current issues around extractive industries and its peculiarities, analysis of the reasons for FDI (including Chinese FDI) remains explicable by standard theory.

Originality/value

FDI in the extractive industry provides a good test of the general theory of FDI and a special theory nested within this gives a great deal of insight into current issues of FDI in extractive industries.

Citation

Buckley, P.J. (2008), "Do we need a special theory of foreign direct investment for extractive industries?", Journal of Chinese Economic and Foreign Trade Studies, Vol. 1 No. 2, pp. 93-104. https://doi.org/10.1108/17544400810884682