Outward foreign direct investment (OFDI) and its relationship with exports of home country is an important aspect of internationalization having implications for both policymakers…
Abstract
Purpose
Outward foreign direct investment (OFDI) and its relationship with exports of home country is an important aspect of internationalization having implications for both policymakers and multinational enterprises (MNEs). This paper aims to examine this relationship by using panel data for ten major emerging countries from Asia over the period 1991-2012.
Design/methodology/approach
The authors use panel vector auto regression, panel cointegration and causality tests in this study.
Findings
The authors find evidence of long-run causality from exports to OFDI. Further, exports and OFDI are found to be substitutes. There is no long-run causality from OFDI to exports, implying that MNEs are not “connecting” with home country firms through backward and forward linkages in the production process.
Originality/value
To the best of the authors’ knowledge, this is the first paper to deal with the relationship of OFDI with exports of the home country, for a group of developing/emerging countries.
Details
Keywords
The relationship of outward foreign direct investment (OFDI) with home country's exports has significant implications for policymakers as well as business managers of MNEs. Since…
Abstract
Purpose
The relationship of outward foreign direct investment (OFDI) with home country's exports has significant implications for policymakers as well as business managers of MNEs. Since BRICS nations have emerged as important sources as well as destinations of FDI, this paper aims to study the impact of OFDI from these countries on home country exports by using panel data for BRICS for time period 1993–2015.
Design/methodology/approach
The author use panel unit root tests, panel cointegration, VECM and causality tests in the study.
Findings
The results reveal that OFDI has a negative and significant impact on home country exports indicating that outward FDI is a substitute for exports in these countries. It also indicates long-run causality from exports towards OFDI. There is no long-run causality running from OFDI to exports, suggesting that MNEs do not “connect” with home economies' firms through forward and backward linkages in value chain.
Practical implications
From the point of view of policymakers, it implies a net outflow of capital as the outflow of foreign investment would not be matched by any incremental export earnings since exports are getting substituted by production abroad. For business managers, it is indicative of a growing foreign market that warrants large scale production and justifies the high cost and risk involved in FDI as a mode of entry compared to exports.
Originality/value
To the best of authors' knowledge, this is the first attempt to deal with the relationship between home country exports and OFDI, for an important group of emerging market economies, i.e. BRICS. The understanding of this relationship allow us to identify whether factors contributing to OFDI from emerging economies are “tied” to their home economies thereby making exports necessary or are rather based on firm specific competencies which are leveraged in different locations to cater to expanding markets.
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Keywords
About 10 years ago the Singapore Government realized that entrepreneurial spirit was lacking in its general population. These conclusions were confirmed by an empirical survey…
Abstract
About 10 years ago the Singapore Government realized that entrepreneurial spirit was lacking in its general population. These conclusions were confirmed by an empirical survey, the Global Entrepreneurship Monitor (GEM), an annual assessment of the national level of entrepreneurial activity. The paternalistic and authoritative approach of the government contributed to the general population’s averseness to participating in riskoriented ventures.
Removing impediments to entrepreneurship is a key challenge for the government and the business sector if the island republic is to maintain its national competitiveness. This article explores the various initiatives taken by the government to stimulate risk-taking and attempts to ascertain if the various measures can be used as key factors to strengthen the inherent cultural values that stimulate the entrepreneurial spirit.The observations can serve as a useful tool for academics and managers in recognizing the cultural traits that influence and help foster entrepreneurial tendencies.