The expansion of South-North and South-South FDI reflects the rise of cross-border capital flows, a distinguishing feature of the contemporary global economy, together with the increasing size and complexity of emerging market multinational corporations (EMNCs). Against this background, in emerging economies governments have become increasingly aware of the role outward FDI (OFDI) can play as an instrument to deepen the integration into the world economy. This paper analyzes recent trends in OFDI from Brazil and China. Using annual data for the period 1980 to 2006 for both countries, we test the well-known investment development path (IDP) theory, according to which the net outward investment position of a country depends on its level of development. Results show that both China and Brazil are moving towards the third stage of the path, where domestic firms have acquired ownership and other advantages to go abroad and become leading outward investors. The role of governments, institutions and the characteristics of domestic firms in both countries are considered to be crucial factors in determining the movement along the path.
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Paper provided by CESPRI, Centre for Research on Innovation and Internationalisation, Universita' Bocconi, Milano, Italy in its series CESPRI Working Papers with number
223.
Length: pages 24 Date of creation: Oct 2008 Date of revision:
Oct 2008 Handle: RePEc:cri:cespri:wp223
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Find related papers by JEL classification: F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business O57 - Economic Development, Technological Change, and Growth - - Economywide Country Studies - - - Comparative Studies of Countries
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