Outward foreign direct investment as escape response to home country institutional constraints

Michael A Witt and Arie Y Lewin
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Michael A Witt: INSEAD, Singapore, Singapore
Arie Y Lewin: Fuqua School of Business, Duke University, Durham, USA

Journal of International Business Studies, 2007, vol. 38, issue 4, 579-594

Abstract: In this perspective paper we argue that outward foreign direct investment (OFDI) undertaken as escape response to perceived misalignment between firm needs and home country institutional conditions represents an important but under-explored phenomenon in the international business (IB) literature. We propose that, in advanced industrialized nations, the extent of OFDI as escape is likely to rise with the extent of societal coordination in the political economy. Societal coordination is associated with relatively slower rates of institutional adjustment and thus with relatively greater prevalence of misalignments that may drive OFDI. We illustrate the face validity of our argument and lay out the implications for future research in IB. Journal of International Business Studies (2007) 38, 579–594. doi:10.1057/palgrave.jibs.8400285

Date: 2007
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