A Tale of Two Theories: Foreign Direct Investment Decisions from the Perspectives of Economic and Institutional Theory
AbstractWe analyze foreign direct investment (FDI) from two theoretical perspectives: the traditional economic perspective and the more recent institutional perspective. By combining a theoretical analysis with empirical tests, we are able to explore the explanatory power of both economic and institutional reasons for FDI. Our results show that a firm’s decision to engage in a foreign market is influenced by the attractiveness of the target market and by prior FDI decisions of large and successful peers. Thus, both theoretical perspectives complement each other in explaining FDI. We believe that any research that ignores one or the other explanation suffers from a serious omission.
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Bibliographic InfoArticle provided by LMU Munich School of Management in its journal Schmalenbach Business Review.
Volume (Year): 62 (2010)
Issue (Month): 3 (July)
Foreign Direct Investment (FDI); Institutional Theory; Internationalization.;
Find related papers by JEL classification:
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- O52 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Europe
- P20 - Economic Systems - - Socialist Systems and Transition Economies - - - General
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