IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/16781.html
   My bibliography  Save this paper

Home market determinants of FDI outflows from developing and transition economies

Author

Listed:
  • Kayam, Saime Suna

Abstract

Outward foreign direct investments (FDI) from developing countries and transition economies have picked up in the last decade. This study examines the home country factors that determine the outward foreign investments from 65 developing and transition countries in the period 2000-2006. The main hypothesis tested is that the small market size, trade conditions, costs of production and local business conditions are the main drivers of outward FDI. In order to examine the effects of these factors, the fixed effects estimation technique is employed using variables that measure income, trade, infrastructure, labour market conditions and economic stability. Proxies for the institutional environment such as bureacracy, corruption, investment risk are also used to reflect both the political and economic push factors on FDI. The preliminary findings reveal that outward FDI from developing countries increases with foreign competition in the domestic market augmented by inward FDI. As government stability, investment profile and bureaucracy quality in the home country improves, outflows of capital decreases. In other words, developing country transnational corporations are formed as a result of escape response from the economic and political conditions in the home countries.

Suggested Citation

  • Kayam, Saime Suna, 2009. "Home market determinants of FDI outflows from developing and transition economies," MPRA Paper 16781, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:16781
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/16781/1/MPRA_paper_16781.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Brian J. Aitken & Ann E. Harrison, 2022. "Do Domestic Firms Benefit from Direct Foreign Investment? Evidence from Venezuela," World Scientific Book Chapters, in: Globalization, Firms, and Workers, chapter 6, pages 139-152, World Scientific Publishing Co. Pte. Ltd..
    2. Manuel Agosin & Roberto Machado, 2005. "Foreign Investment in Developing Countries: Does it Crowd in Domestic Investment?," Oxford Development Studies, Taylor & Francis Journals, vol. 33(2), pages 149-162.
    3. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, vol. 19(3), pages 317-344, November.
    4. Urmas Varblane & Tonu Roolaht & Ele Reiljan & Rein Juriado, 2001. "Estonian Outward Foreign Direct Investments," University of Tartu - Faculty of Economics and Business Administration Working Paper Series 9, Faculty of Economics and Business Administration, University of Tartu (Estonia).
    5. Paul Brenton & Francesca Di Mauro & Matthias Lücke, 2014. "Economic Integration and FDI: An Empirical Analysis off Foreign Investment in the EU and in Central and Eastern Europe," World Scientific Book Chapters, in: INTERNATIONAL TRADE, DISTRIBUTION AND DEVELOPMENT Empirical Studies of Trade Policies, chapter 7, pages 125-151, World Scientific Publishing Co. Pte. Ltd..
    6. Wladimir Andreff, 2002. "The new multinational corporations from transition countries," Post-Print halshs-00274655, HAL.
    7. Mihir A. Desai & C. Fritz Foley & James R. Hines Jr., 2005. "Foreign Direct Investment and the Domestic Capital Stock," American Economic Review, American Economic Association, vol. 95(2), pages 33-38, May.
    8. Nagesh Kumar, 2006. "Emerging Multinationals : Trends, Patterns and Determinants of Outward Investment by Indian Enterprises," Microeconomics Working Papers 22108, East Asian Bureau of Economic Research.
    9. Felipa De Mello-Sampayo, 2007. "The Location of the United States' FDI Under the Share Gravity Model," International Economic Journal, Taylor & Francis Journals, vol. 21(4), pages 491-519.
    10. Bruce Blonigen, 2005. "A Review of the Empirical Literature on FDI Determinants," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 33(4), pages 383-403, December.
    11. Wladimir Andreff, 2003. "The newly emerging TNCs from economies in transition: a comparison with Third World outward FDI," Post-Print halshs-00274654, HAL.
    12. Michael A Witt & Arie Y Lewin, 2007. "Outward foreign direct investment as escape response to home country institutional constraints," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 38(4), pages 579-594, July.
    13. Frenkel, Michael & Funke, Katja & Stadtmann, Georg, 2004. "A panel analysis of bilateral FDI flows to emerging economies," Economic Systems, Elsevier, vol. 28(3), pages 281-300, September.
    14. Andreff, Wladimir, 2002. "The new multinational corporations from transition countries," Economic Systems, Elsevier, vol. 26(4), pages 371-379, December.
    15. Rivoli, Pietra & Brewer, Thomas L., 1997. "Political instability and country risk," Global Finance Journal, Elsevier, vol. 8(2), pages 309-321.
    16. Louis T. Wells, 1983. "Third World Multinationals: The Rise of Foreign Investments from Developing Countries," MIT Press Books, The MIT Press, edition 1, volume 1, number 026273169x, April.
    17. Lecraw, Donald J, 1977. "Direct Investment by Firms from Less Developed Countries," Oxford Economic Papers, Oxford University Press, vol. 29(3), pages 442-457, November.
    18. Kueh, Jerome Swee-Hui & Puah, Chin-Hong & Abu Mansor, Shazali, 2009. "Empirical analysis on emerging issues of Malaysia outward FDI from macroeconomic perspective," MPRA Paper 37680, University Library of Munich, Germany.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Rishika Nayyar & Jaydeep Mukherjee, 2018. "Outward FDI from India: A macro level examination in the presence of structural breaks," Working Papers 1833, Indian Institute of Foreign Trade.
    2. Mustafa Sakr & Andre Jordaan, 2016. "Emerging Multinational Corporations: A Prominent Player in the Global Economy," Working Papers 201623, University of Pretoria, Department of Economics.
    3. Wladimir Andreff, 2017. "New-Wave Emerging Multinational Companies: The Determinants of Their Outward Foreign Direct Investment," Post-Print hal-03231804, HAL.
    4. Sheeba Kapil & Puneet Kaur Dhingra, 2021. "Flagging Determinants for Indian Outbound M&A," International Journal of Economics and Financial Issues, Econjournals, vol. 11(5), pages 1-10.
    5. Igor M. Drapkin, 2020. "The Influence of Taxes on Inflows and Outflows of Foreign Direct Investment," Journal of Tax Reform, Graduate School of Economics and Management, Ural Federal University, vol. 6(3), pages 224-255.
    6. dogru, bulent, 2012. "The effect of instıtutıonal varıables on fdi inflows: Evidence from upper-middle income countries," MPRA Paper 37531, University Library of Munich, Germany.
    7. Dogru, Bülent, 2012. "Effect of judıcıal independence to FDI into Eastern Europea and South Asia," MPRA Paper 40471, University Library of Munich, Germany.
    8. Wladimir Andreff, 2017. "New-Wave Emerging Multinational Companies: The Determinants of Their Outward Foreign Direct Investment," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) hal-03231804, HAL.
    9. Burcak Polat, 2015. "Determinants of FDI into Central and Eastern European Countries: Pull or Push Effect?," Eurasian Journal of Economics and Finance, Eurasian Publications, vol. 3(4), pages 39-47.
    10. Klimek Artur, 2015. "Institutions and Outward Foreign Direct Investment," International Journal of Management and Economics, Warsaw School of Economics, Collegium of World Economy, vol. 46(1), pages 101-119, June.
    11. André C. Jordaan & Mustafa Sakr, 2017. "Push factors of emerging multinational corporations: evidence from South Africa and Egypt," Working Papers 664, Economic Research Southern Africa.
    12. Sheeba Kapil & Kaur Dhingra, 2022. "Unveiling Influence Of Home Macroeconomic Factors On Indian Outbound M&A," Review of Economic and Business Studies, Alexandru Ioan Cuza University, Faculty of Economics and Business Administration, issue 29, pages 9-28, June.
    13. Godwin Okafor & Obiajulu Ede, 2023. "Kidnapping rate and capital flight: Empirical evidence from developing countries," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 28(3), pages 2590-2606, July.
    14. Dorota Ciesielska-Maciagowska & Marcin Koltuniak, 2021. "Foreign Direct Investments and Home Country’s Institutions: The Case of CEE Countries," European Research Studies Journal, European Research Studies Journal, vol. 0(1), pages 335-353.
    15. Sobir Shukurov & Mansoor Maitah & Luboš Smutka, 2016. "Determinants of Foreign Direct Investments in Transition Economies: Case of Commonwealth of Independent Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 64(5), pages 1749-1761.
    16. Mehmed Ganic, 2022. "Does Institutional Quality Matter for the IDP Hypothesis? Evidence from Emerging Europe," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 24(1), pages 83-113, June.
    17. Damijan, Jože & Kostevc, Crt & Rojec, Matija, 2014. "Outward FDI and company performance in CEECs," Working Paper Series in Economics and Institutions of Innovation 381, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Kayam, Saime S. & Hisarcıklılar, Mehtap & Kayalıca, Özgür, 2011. "Spoilt for Choice: Explaining the location choice of Turkish Transnationals," MPRA Paper 39150, University Library of Munich, Germany.
    2. Andreff, Wladimir & Andreff, Madeleine, 2017. "Multinational companies from transition economies and their outward foreign direct investment," Russian Journal of Economics, Elsevier, vol. 3(4), pages 445-474.
    3. Stoian, Carmen, 2013. "Extending Dunning's Investment Development Path: The role of home country institutional determinants in explaining outward foreign direct investment," International Business Review, Elsevier, vol. 22(3), pages 615-637.
    4. Farla, Kristine & de Crombrugghe, Denis & Verspagen, Bart, 2016. "Institutions, Foreign Direct Investment, and Domestic Investment: Crowding Out or Crowding In?," World Development, Elsevier, vol. 88(C), pages 1-9.
    5. Björn Jindra & Sohaib S. Hassan & Jutta Günther & Uwe Cantner, 2015. "European Integration and Outward FDI from Central and Eastern Europe – Is There Any Evidence of Knowledge-seeking?," Journal of Common Market Studies, Wiley Blackwell, vol. 53(6), pages 1248-1267, November.
    6. Stoian, Carmen & Mohr, Alex, 2016. "Outward foreign direct investment from emerging economies: escaping home country regulative voids," International Business Review, Elsevier, vol. 25(5), pages 1124-1135.
    7. Narula, Rajneesh, 2010. "Much ado about nothing, or sirens of a brave new world?: MNE activity from developing countries and its significance for development," MERIT Working Papers 2010-021, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    8. Oludotun Fasanya, David & Ingham, Hilary & Read, Robert, 2022. "Determinants of internationalisation by firms from Sub-Saharan Africa," Journal of Business Research, Elsevier, vol. 144(C), pages 951-965.
    9. Qiuping Chen & Bo Ning & Yue Pan & Jinli Xiao, 2022. "Green finance and outward foreign direct investment: evidence from a quasi-natural experiment of green insurance in China," Asia Pacific Journal of Management, Springer, vol. 39(3), pages 899-924, September.
    10. Baccouche, Rafik & Bouoiyour, Jamal & Hatem, M’Henni & Mouley, Sami, 2008. "Dynamique des investissements, mutations sectorielles et convertibilité du compte de capital : impacts des mesures de libéralisation et expériences comparées Tunisie - Maroc [Dynamics of investment," MPRA Paper 38148, University Library of Munich, Germany.
    11. Gnangnon, Sèna Kimm, 2018. "Effect of multilateral trade liberalization on foreign direct investment outflows amid structural economic vulnerability in developing countries," Research in International Business and Finance, Elsevier, vol. 45(C), pages 15-29.
    12. Kuznetsov, Alexey, 2010. "Urgent tasks for research on Russian TNCs," MPRA Paper 42702, University Library of Munich, Germany.
    13. Abreo, Carlos & Carrillo, Eduardo & Pédussel Wu, Jennifer, 2023. "Characteristics of Colombian inward foreign direct investment," IPE Working Papers 212/2023, Berlin School of Economics and Law, Institute for International Political Economy (IPE).
    14. Lahimer, Noomen, 2009. "La contribution des investissements directs étrangers à la réduction de la pauvreté en Afrique subsaharienne," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/1167 edited by Goaied, Mohamed & Bienaymé, Alain.
    15. Narula, Rajneesh & Nguyen, Quyen T.K., 2011. "Emerging country MNEs and the role of home countries: separating fact from irrational expectations," MERIT Working Papers 2011-021, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    16. Dohse, Dirk & Hassink, Robert & Klaerding, Claudia, 2012. "Emerging multinationals, international knowledge flows and economic geography: A research agenda," Kiel Working Papers 1776, Kiel Institute for the World Economy (IfW Kiel).
    17. Kayam, Saime Suna & Hisarciklilar, Mehtap, 2009. "Determinants of Turkish FDI abroad," MPRA Paper 17813, University Library of Munich, Germany.
    18. Elheddad, Mohamed, 2019. "Foreign direct investment and domestic investment: Do oil sectors matter? Evidence from oil-exporting Gulf Cooperation Council economies," Journal of Economics and Business, Elsevier, vol. 103(C), pages 1-12.
    19. Yang, Jiao-Hui & Wang, Wei & Wang, Kai-Li & Yeh, Chung-Ying, 2018. "Capital intensity, natural resources, and institutional risk preferences in Chinese Outward Foreign Direct Investment," International Review of Economics & Finance, Elsevier, vol. 55(C), pages 259-272.
    20. Wladimir Andreff, 2015. "Maturing Strategies Of Russian Multinational Companies: Comparisons With Chinese Multinationals," Post-Print halshs-01287431, HAL.

    More about this item

    Keywords

    outward FDI; push factors; developing countries;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:16781. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.