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Escape FDI and the dynamics of a cumulative process of institutional misalignment and contestation: Stress, strain and failure

Helena Barnard and John M. Luiz

Journal of World Business, 2018, vol. 53, issue 5, 605-619

Abstract: We argue that escape foreign direct investment (FDI) happens when unknown future “rules of the game” cause concern about the continued productive capacity of the economy. Adapting the stress-strain-fail model of materials failure, we argue that escape FDI is a process with three cumulative phases. Conditions for escape FDI (stress) are created by institutional deterioration and contained contestation. Limited escape FDI (strain) results from periods of societal instability and/or inadequate institutional reforms. Extensive escape FDI (failure) results from pervasive societal instability and/or fundamental changes in institutions. Using a historical approach, we develop these propositions for South Africa, 1956 to 2012.

Keywords: Escape FDI; Institutional misalignment; Contestation; Historical method; South Africa (search for similar items in EconPapers)
Date: 2018
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Handle: RePEc:eee:worbus:v:53:y:2018:i:5:p:605-619