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

Rajah Rasiah, Peter Gammeltoft and Yang Jiang

International Journal of Emerging Markets, 2010, vol. 5, issue 3/4, 333-357

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: Emerging markets; International investments; Government policy; South East Asia; South Asia (search for similar items in EconPapers)
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:17468801011058415

DOI: 10.1108/17468801011058415

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