Exploring the outflow of FDI from the developing economies: selected case studies

A new trend has emerged in the flow of foreign direct investment (FDI) in recent times. FDI from the emerging and developing economies such as China,India, South Africa and Brazil is flowing to both developed and developing economies. There is more flexibility of movement of capital and knowledge which does not conform to hitherto held assumptions that FDI flows in a particular pattern, that is, largely from the developed economies to the developing economies. This new trend needs to be captured both empirically and conceptually. We explore the factors driving this outward flow of FDI from developing economies and the shape and nature of this flow. For this, we
employ case studies of companies from China, India and South Africa. The results show that the main motivating factors behind OFDI are: to emerge as a global player/ leader or regional player; to achieve international competitiveness through gaining new markets in the developing world (regional markets) and increasing existing share or gaining access to developed countries (global
market); to gain access to new R&D/ technological capabilities; to move up the value chain in terms of technological complexity; and (ii) to ensure raw material
security in the long term (in the case of companies in natural resources sectors). All these factors are evident in the new trend of OFDI from the emerging or transition economies to the rest of the world.

DIR Research Series, Working Paper No. 149
ISSN: 0904-8154