Home Country Determinants of Outward FDI from Developing Countries

This article examines various home country determinants of outward FDI from developing economies, which have received limited attention in empirical studies. The role of home country determinants is investigated for a large sample of developing economies, as against a handful of developing economies, for the most recent period, 1996–2010, using a panel data econometric framework. The results indicate that source country’s level of economic development, globalisation, political risk and science and technology investments contribute significantly to outward FDI from developing countries. While outward FDI might be unavoidable in the course of economic development and globalisation, developing countries need to emphasise improving political governance in order to prevent capital outflow arising out of high domestic political risk. On the flip side, science and technology investments could contribute to higher outward FDI, thereby yielding complementary benefits of internationalisation in the long-run. Thus, given the evolving role of developing countries in the global economic scenario, a balance between domestic and international investments is crucial for them to harness the benefits of globalisation, which can be achieved through suitable governance and policy reforms in specific fields.