Outward FDI and profitability of emerging economy firms: Diversifying from home resource dependence in early stage internationalization

Lin Cui and Ying Xu

Journal of World Business, 2019, vol. 54, issue 4, 372-386

Abstract: We investigate the effect of conducting FDI on the profitability of emerging economy firms in early stage internationalization. We argue that FDI can be an effective strategy to alleviate liabilities of emergingness, thus generating positive performance outcomes. We hypothesize that, contingent on factors altering motivation and capability of firms to diversify from home resource dependence, emerging economy firms can benefit from conducting FDI, resulting in a greater rate of intangible assets growth and enhanced profitability. Using panel data of Chinese firms prior to the global financial crisis, and through combining matching techniques with difference-in-difference analysis, we find empirical support for our arguments.

Keywords: Resource dependence theory; International diversification; Multinational enterprises; Emerging economy; Liabilities of emergingness; Foreign direct investment (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (38)

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DOI: 10.1016/j.jwb.2019.04.002

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