The Investment Development Path and FDI From Developing Countries: The Role of Pro-Market Reforms and Institutional Voids

We study the applicability of the investment development path to multinationals from developing countries and illustrate these arguments by analyzing the evolution of Brazilian outward foreign direct investment. This model argues that as countries develop, their firms will develop sophisticated capa...

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Bibliographic Details
Published in:Latin American business review (Binghamton, N.Y.) N.Y.), 2011-07, Vol.12 (3), p.209-231
Main Authors: Stal, Eva, Cuervo-Cazurra, Alvaro
Format: Article
Language:English
Subjects:
Developing countries
Development
Foreign direct investment
Foreign investment
institutional voids
Institutionalism
Investment
investment development path
Latin America
LDCs
Market economy
multinational companies
Multinational corporations
Multinational enterprises
pro-market reforms
Strategic management
Studies
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Summary:We study the applicability of the investment development path to multinationals from developing countries and illustrate these arguments by analyzing the evolution of Brazilian outward foreign direct investment. This model argues that as countries develop, their firms will develop sophisticated capabilities and eventually become multinational firms. In the case of emerging countries, two additional factors accelerate this process. One is the push of pro-market reforms, whereby firms upgrade their capabilities to compete in the home country, thus becoming multinationals earlier than expected. The second is the push of institutional voids, whereby firms avoid excessive and misguided regulations of the local institutional environment.
ISSN:1097-8526
1528-6932
DOI:10.1080/10978526.2011.614174