XML

Seoul Journal of Economics - Vol. 23 , No. 2
[Paper List] [Go to Volume List]

[ Article ]
Seoul Journal of Economics - Vol. 23, No. 2, pp. 239-261
Abbreviation: SJE
ISSN: 1225-0279 (Print)
Print publication date 31 May 2010
Received 06 Oct 2009 Revised 26 Apr 2010

Outward FDI from Developing Country MNEs as a Channel for Technological Catch-up
Alessia Amighini ; Roberta Rabellotti ; Marco Sanfilippo
Assistant Professor, SEMeQ, University of Piemonte Orientale, Italy, Tel: +39-03-2137-5332 (alessia.amighini@eco.unipmn.it)
Corresponding Author, Associate Professor, SEMeQ, University of Piemonte Orientale, Via Perrone 18, 28100 Novara, Italy, Tel: +39-03-2137-5317, Fax: +39-03-2137-5305 (roberta.rabellotti@eco.unipmn.it)
Research Fellow, Robert Schuman Centre for Advanced Studies, European University Institute, Italy, Tel: +39-055-4685-718 (marco.sanfilippo@eui.eu)

Funding Information ▼

JEL Classification: F21, P45

Abstract

One of the more recent aspects of the globalization process is the rise and the increasing outward expansion of multinational enterprises (MNEs) from developing countries. Among the more promising effects of this phenomenon is a potentially positive development impact: through outward foreign direct investment (OFDI) developing country MNEs acquire new knowledge, which contributes to the technological catch-up of their home countries. This paper reviews the recent literature on OFDI from developing countries, with a critical focus on the theory and evidence of FDI as a channel for technological catch-up. This literature suggests that the features and global business environment of current emerging country MNEs is different from those of latecomer firms in earlier decades. Modularity of production in an increasing number of sectors, combined with weak national innovation systems (NIS) in many developing countries explain why the sourcing of strategic assets ― including technology and innovation ― from abroad through OFDI has become such an important channel for technological catch-up.

Keywords: Developing country MNEs, Internationalization, FDI, Technological catch-up
Acknowledgments

Financial support from Compagnia di San Paolo, CASCC (Centro Alti Studi sulla Cina) and PRIN 2007 is gratefully acknowledged.

References
1. Amsden, Alice. Asia's Next Giant: South Korea and Late Industrialisation. Oxford: Oxford University Press, 1989.
2. Athreye, Suma, and Godley, Andrew. “Internationalization and Technological Leapfrogging in the Pharmaceutical Industry.” Industrial and Corporate Change 18 (No. 2 2009): 295-323.
3. Athreye, Suma, and Kapur, Sandeep. “Introduction: The Internationalization of Chinese and Indian Firms ― Trends, Motivations, and Strategy.” Industrial and Corporate Change 18 (No. 2 2009): 209-21.
4. Aulakh, Preet S. “Special Issue on Emerging Multinationals from Developing Economies: Motivations, Paths, and Performance.” Journal of International Management 13 (No. 3 2007): 235-402.
5. Banga, Rashmi. “Drivers of Outward Foreign Direct Investment from Asian Developing Economies.” In ESCAP (ed.), Towards Coherent Policy Frameworks ― Understanding Trade and Investment Linkages. Bangkok: ESCAP, 2009.
6. Barney, Jay B. “Firm Resources and Sustained Competitive Advantage.” Journal of Management 17 (No. 1 1991): 99-121.
7. Bonaglia, Federico, Goldstein, Andrea, and Mathews, John. Accelerated Internationalization by Emerging Multinationals: The Case of White Goods Sector. MPRA Paper No. 1485, Munich, 2007.
8. Buckley, Peter J., and Casson, Mark. The Future of the Multinational Enterprise, 2nd Edition, London: McMillan, 1976.
9. Buckley, Peter J., Clegg, Jeremy, Cross, Adam R., Liu, Xin, Voss, Hinrich, and Zheng, Ping. “The Determinants of Chinese Outward Foreign Direct Investment.” Journal of International Business Studies 38 (No. 4 2007): 499-518.
10. Buckley, Peter J., Cross, Adam R., Tan, Hui, Liu, Xin, and Voss, Hinrich. “Historic and Emergent Trends in Chinese Outward Direct Investment.” Management International Review 48 (No. 6 2008): 715-48.
11. Carlsson, Bo. “Internationalization of Innovation Systems: A Survey of the Literature.” Research Policy 35 (No. 1 2006): 56-67.
12. Carvalho, Flavia, Costa, Ionara, and Duysters, Geert. Global Players from Brazil: Drivers and Challenges in the Internationalization Process of Brazilian Firms. UNU-Merit Working Paper No. 016, Maastricht, 2010.
13. Chen, Homin M., and Chen, Tain-Ji. “Network Linkage and Location Choice in Foreign Direct Investment.” Journal of International Business Studies 29 (No. 3 1998): 445-68.
14. Child, John, and Rodrigues, Suzana B. “The Internationalization of Chinese Firms: A Case for Theoretical Extension?” Management and Organization Review 1 (No. 3 2005): 381-410.
15. Chittoor, R., and Ray, S. “Internationalization Paths of Indian Pharmaceutical Firms ― A Strategic Group Analysis.” Journal of International Management 13 (No. 3 2007): 338-55.
16. Cohen, Wesley M., and Levinthal, Daniel A. “Absorptive Capacity: A New Perspective on Learning and Innovation.” Administrative Science Quarterly 35 (No. 1 1990): 128-52.
17. Cross, Adam R., and Voss, Hinrich. Chinese Direct Investment in the United Kingdom: An Assessment of Motivations and Competitiveness. Paper Presented at Corporate Strategies in the New Asia, University of Bremen, Bremen, Germany, February 1-2, 2008.
18. Cuervo-Cazurra, Alvaro, and Genc, Mehmet. “Transforming Disadvantages into Advantages: Developing-Country MNEs in the Least Developed Countries.” Journal of International Business Studies 39 (No. 6 2008): 957-79.
19. Deng, Ping. “Why Do Chinese Firms Tend to Acquire Strategic Assets in International Expansion?” Journal of World Business 44 (No. 1 2009): 74-84.
20. Dunning, John H. International Production and the Multinational Enterprise. London: Allen & Unwin, 1981.
21. Dunning, John H. “Comment on Dragon Multinationals: New Players in 21st Century Globalization.” Asia Pacific Journal of Management 23 (No. 2 2006): 139-41.
22. Dunning, John H., Kim, Changsu, and Park, Donghyun. Old Wine in New Bottles: A Comparison of Emerging Market TNCs Today and Developed Country TNCs Thirty Years Ago. SLPTMD Working Paper Series No. 011, Department of International Economics, Oxford: University of Oxford, 2008.
23. Dunning, John H., and Lundan, Sarianna M. “Institutions and the OLI Paradigm of the Multinational Enterprise.” Asia Pacific Journal of Management 25 (No. 4 2008): 573-93.
24. Duysters, Geert, Jacob, Jojo, Lemmens, Charmianne, and Hu, Jintian. Internationalization and Technological Catching up of Emerging Multinationals: A Case Study of China's Haier Group. UNU-Merit Working Paper Series No. 052, Maastricht, the Netherlands, 2008.
25. Elango, B., and Pattnaik, Chinmay. “Building Capabilities for International Operations through Networks: A study of Indian Firms.” Journal of International Business Studies 38 (No. 4 2007): 541-55.
26. Goldstein, Andrea. Multinational Companies from Emerging Economies: Composition, Conceptualization and Direction in the Global Economy. London: Palgrave Macmillan, 2007.
27. Goldstein, Andrea. The Internationalization of Indian Companies: The Case of Tata. Centre for Advanced Study on India (CASI) Working Paper No. 08-02, University of Pennsylvania, 2008.
28. Goldstein, Andrea, and Pananond, Pavida. Singapore and Thailand. Paper Presented at the International Workshop on Intra-Asian FDI Flows: Magnitude, Trends, Prospects, and Policy Implications, India Habitat Centre, New Delhi, April 25-26, 2007.
29. Hitt, Michael A., Dacin, M. Tina, Levitas, Edward, Arregle, Jean-Luc, and Borza, Anca. “Partner Selection in Emerging and Developed Market Contexts: Resource-based and Organizational Learning Perspective.” Academy of Management Journal 43 (No. 3 2000): 449-67.
30. Hymer, Stephen H. The International Operations of National Firms: A Study of Foreign Direct Investment. Cambridge, MA: MIT Press, 1976.
31. Johanson, Jan, and Vahlne, Jan-Eric. “The Internationalization Process of the Firm: A Model of Knowledge Development and Increasing Foreign Market Commitments.” Journal of International Business Studies 8 (No. 1 1977): 23-32.
32. Kalotay, Kalman, and Sulstarova, Astrid. Modelling Russian Outward FDI. Paper Prepared for the Conference on Emerging Multinationals: Outward FDI from Emerging and Developing Economies, Copenhagen Business School, Copenhagen, Denmark, October 9-10, 2008.
33. Kim, Jung Min, and Rhe, Dong Kee. “Trends and Determinants of South Korean Outward Foreign Direct Investment.” The Copenhagen Journal of Asian Studies 27 (No. 1 2009): 126-54.
34. Kim, Linsu. Imitation to Innovation: The Dynamics of Korea's Technological Learning. Boston: Harvard Business School Press, 1997.
35. Kogut, Bruce, and Zander, Udo. “Knowledge of the Firm and the Evolutionary Theory of the Multinational Corporation.” Journal of International Business Studies 24 (No. 4 1993): 625-45.
36. Kumar, Nagesh. “Emerging MNCs: Trends, Patterns, and Determinants of Outward FDI by Indian Enterprises.” In R. Rajan, R. Kumar, and N. Virgill (eds.), New Dimensions of Economic Globalization: Surge of Outward Foreign Direct Investment from Asia. World Scientific: Singapore, 2008.
37. Lall, Sanjaya. The New Multinationals: The Spread of Third World Enterprises. Chichester: Wiley, 1983.
38. Lall, Sanjaya. “Technological Capabilities and Industrialization.” World Development 20 (No. 2 1992): 165-86.
39. Lall, Sanjaya. “Understanding Technology Development.” Development and Change 24 (No. 4 1993): 719-53.
40. Lall, Sanjaya. Competitiveness, Technology, and Skills. Cheltenham, Edward Elgar, 2001.
41. Lee, Jaheo, and Slater, Jim. “Dynamic Capabilities, Entrepreneurial Rent-Seeking and the Investment Development Path: The Case of Samsung.” Journal of International Management 13 (No. 3 2007): 241-57.
42. Lee, Keun, and Lim, Chaisung. “Technological Regimes, Catching-up and Leapfrogging: Findings from the Korean Industries.” Research Policy 30 (No. 3 2001): 459-83.
43. Li, Peter Ping. “Toward an Integrated Theory of Multinational Evolution: The Evidence of Chinese Multinational Enterprises as Latecomers.” Journal of International Management 13 (No. 3 2007): 296-318.
44. Liu, Ling, and Tian, Ying. “The Internationalisation of Chinese Enterprises: The Analysis of the UK Case.” International Journal of Technology and Globalization 4 (No. 1 2008): 87-102.
45. Liu, Xiaohui, and Buck, Trevor. “The Internationalization Strategies of Chinese Firms: Lenovo and BOE.” Journal of Chinese Economic and Business Studies 7 (No. 2 2009): 167-81.
46. Liu, Xielin. China's Development Model: An Alternative Strategy for Technological Catch-up. SLPTMD Working Paper Series No. 020, University of Oxford, Department of International Development, 2005.
47. Liu, Xielin, and White, Steven. “Comparing Innovation Systems: A Framework and Application to China's Transition Context.” Research Policy 30 (No. 7 2001): 1091-114.
48. Lundvall, Bengt-Åke, Joseph, K. J., Chaminade, Cristina, and Vang, Jan. Handbook of Innovation Systems and Developing Countries. Building Domestic Capabilities in a Global Setting. Cheltenham: Edward Elgar, 2009.
49. Luo, Yadong, and Tung, Rosalie L. “International Expansion of Emerging Market Enterprises: A Springboard Perspective.” Journal of International Business Studies 38 (No. 4 2007): 481-98.
50. Makino, Shige, Lau, Chung-Ming, and Yeh, Rhy-Song. “Asset-Exploitation versus Asset Seeking: Implication for Location Choice of Foreign Direct Investment from Newly Industrialized Economies.” Journal of International Business Studies 33 (No. 3 2002): 403-21.
51. Mathews, John A. Dragon Multinationals ― A New Model for Global Growth. Oxford: Oxford University Press, 2002a.
52. Mathews, John A. “Competitive Advantages of the Latecomer Firm: A Resource-Based Account of Industrial Catch-up Strategies.” Asia Pacific Journal of Management 19 (No. 4 2002b): 467-88.
53. Mathews, John A. “The Intellectual Roots of Latecomer Industrial Development.” International Journal of Technology and Globalization 1 (Nos. 3-4 2006a): 433-50.
54. Mathews, John A. “Dragon Multinationals: New Players in 21st Century Globalization.” Asia Pacific Journal of Management 23 (No. 1 2006b): 5-27.
55. Mathews, John A. “Response to Professors Dunning and Narula.” Asia Pacific Journal of Management 23 (No. 2 2006c): 153-5.
56. Mathews, John A. “Catch-up Strategies and the Latecomer Effect in Industrial Development.” New Political Economy 11 (No. 3 2006d): 1-23.
57. Moon, Hwy-Chang, and Roehl, Thomas W. “Unconventional Foreign Direct Investment and the Imbalance Theory.” International Business Review 10 (No. 2 2001): 197-215.
58. Mu, Qing, and Lee, Keun. “Knowledge Diffusion, Market Segmentation, and Technological Catch-up: The Case of the Telecommunication Industry in China.” Research Policy 34 (No. 6 2005): 759-83.
59. Narula, Rajneesh. “Globalization, New Ecologies, New Zoologies, and the Purported Death of the Eclectic Paradigm.” Asia Pacific Journal of Management 23 (No. 2 2006): 143-51.
60. Narula, Rajneesh. Much Ado about Nothing, or Sirens of a Brave New World? MNE Activity from Developing Countries and Its Significance for Development. UNU-Merit Working Paper Series No. 021, Maastricht, the Netherlands, 2010.
61. Niosi, Jorge, and Tschang, F. Ted. “The Strategies of Chinese and Indian Software Multinationals: Implications for Internationalization Theory.” Industrial and Corporate Change 18 (No. 2 2009): 269-94.
62. OECD. Emerging Multinationals: Who are They? What Do They Do? What is at Stake? Paris: OECD, 2006.
63. Pananond, Pavida. “The Changing Dynamics of Thai Multinationals after the Asian Economic Crisis.” Journal of International Management 13 (No. 3 2007): 356-75.
64. Perez, Carlota. “New Technologies and Development.” In C. Freeman and B. Lundvall (eds.), Small Countries Facing the Technological Revolution. London: Pinter Publishers, 1988.
65. Pietrobelli, Carlo, and Rabellotti, Roberta. “Innovation Systems and Global Value Chains.” In B.-Å. Lundvall, K. J. Joseph, C. Chaminade, and J. Vang (eds.), Handbook of Innovation Systems and Developing Countries. Building Domestic Capabilities in a Global Setting, Cheltenham: Edward Elgar, 2009.
66. Pietrobelli, Carlo, Rabellotti, Roberta, and Sanfilippo, Marco. The ‘Marco Polo’ Effect: Chinese FDI in Italy. International Economics Programme Paper No. 4, London: Chatham House, 2010.
67. Pradhan, Jaya P. Emerging Multinationals from India and China: Origin, Impetus and Growth. MPRA Paper No. 18210, Munich, 2009.
68. Pradhan, Jaya, and Singh, Neelam. Outward FDI and Knowledge Flows ― A study of the Indian Automotive Sector. ISID Working Paper No. 010, Institute for Studies in Industrial Development, New Delhi, 2008.
69. Ramamurti, Ravi. What Have We Learned about Emerging-Market MNEs? Insights from a Multi-Country Research Project. Paper Prepared for the Conference on Emerging Multinationals: Outward FDI from Emerging and Developing Economies, Copenhagen Business School, Copenhagen, October 9-10, 2008.
70. Rui, Huaichuan, and Yip, George S. “Foreign Acquisitions by Chinese Firms: A Strategic Intent Perspective” Journal of World Business 43 (No. 2 2008): 213-26.
71. Sauvant, Karl. The Rise of Transnational Corporations from Emerging Markets: Threat or Opportunity? Northampton: Edwar Elgar, 2008.
72. Schüler-Zhou, Yun, and Schüller, Margot. The Decision-making Autonomy in Chinese Overseas Subsidiairies: The German Case. Hamburg: GIGA Institute of Asia Studies, Hamburg, Germany, 2009.
73. Teece, David J., Pisano, Gary, and Suen, Amy. “Dynamic Capabilities and Strategic Management.” Strategic Management Journal 18 (No. 7 1997): 509-33.
74. Tolentino, Paz Estrella. Technological Innovation and Third World Multinationals. London: Routledge, 1992.
75. UNCTAD. World Investment Report. Geneva: UNCTAD, Various Years.
76. UNIDO. Industrial Development Report ― Competing Through Innovation and Learning. Vienna: UNIDO, 2003.
77. UNIDO. Alliances and Joint Ventures ― Patterns of Internationalization for Developing Country Enterprises. Vienna: UNIDO, 2006.
78. Vernon, Raymond. “International Investment and International Trade in the Product Cycle.” Quarterly Journal of Economics 80 (No. 2 1966): 190-207.
79. Wells, Louis T. Third World Multinationals: The Rise of Foreign Investment from Developing Countries. Cambridge, Massachusetts: The MIT Press, 1983.
80. Yiu, Daphne W., Lau Chung-Ming, and Bruton, Gary D. “International Venturing by Emerging Economy Firms: The Effects of Firm Capabilities, Home Country Networks, and Corporate Entrepreneurship.” Journal of International Business Studies 38 (No. 4 2007): 519-40.
81. Zhang, Ying. Alliance-based Network View on Chinese Firms’ Catching-up: Case Sudy of Huawei Technologies Co. Ltd. UNU-Merit Working Paper No. 039, Maastricht, the Netherlands, 2009.
 

Editorial Office, Seoul Journal of Economics, Institute of Economic Research, Seoul National University 599 Gwanangno, Gwanak-gu, Seoul 151-746, Korea
Tel: +82-2-880-5434 | Fax: +82-2-888-4454 | E-mail: sje@plaza.snu.ac.kr
Copyright (c) 2020 SJE. All rights reserved.