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On the treatment of finance-specific factors within the OLI paradigm

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  • Oxelheim, Lars
  • Randøy, Trond
  • Stonehill, Arthur

Abstract

This article argues that the body of foreign direct investment (FDI) literature in general and the ownership, location, and internalization (OLI) paradigm in particular would be enriched if finance-specific factors are explicitly incorporated as drivers of FDI. We suggest that financial strategies involving factors such as debt/equity swaps or equity listings in foreign equity markets affect the firm's relative cost and availability of capital, and motivate a firm's engagement in FDI. Large, research-intensive firms, predominantly resident in the USA, UK, Japan or other liquid markets, have in the literature been identified as typical prototypes of multinational enterprises undertaking FDI. These firms are assumed to have no restrictions as regards their ability to achieve a competitive cost and availability of capital, a focus that has made financial capabilities and resources less of an issue in FDI research. Our article mitigates this by emphasizing the relevance of finance-specific proactive strategies for FDI to occur. We generate eight testable hypotheses based on the recognition of finance-specific factors as active drivers of value creating FDI.

Suggested Citation

  • Oxelheim, Lars & Randøy, Trond & Stonehill, Arthur, 2001. "On the treatment of finance-specific factors within the OLI paradigm," International Business Review, Elsevier, vol. 10(4), pages 381-398, August.
    • Handle: RePEc:eee:iburev:v:10:y:2001:i:4:p:381-398
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    More about this item

    Keywords

    FDI Cost of capital Financial strategies OLI;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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