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Why do firms invest abroad? An analysis of the motives underlying Foreign Direct Investments

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Author Info
Chiara Franco
Francesco Rentocchini ()
Giuseppe Vittucci Marzetti ()

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Abstract

Although FDI have been at the forefront of economic debate since a long time, economists have not yet developed a unified framework for their investigation. In this paper, we put forward the idea that an essential point to analyze FDI concerns their underpinning motives. Motives are at the core of FDI and FDI are only but one of different alternative means for firms to grasp an opportunity in a foreign country. We discuss the factors that shape the set of available alternatives and analyze those affecting the decision to engage in FDI (internalization determinants), along with those influencing their localization (local- ization determinants). Starting from Dunning (1993) we put forward a revised taxonomy of FDI motives consistent with this framework { resource seeking, market seeking and non-marketable asset seeking. In order to show its practical implications, we survey common empirical issues on FDI showing how our analysis can shed light on seemingly contradictory empirical results

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Paper provided by Department of Economics, University of Trento, Italia in its series Department of Economics Working Papers with number 0817.

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Date of creation: 2008
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Handle: RePEc:trn:utwpde:0817

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Related research
Keywords: FDI determinants; FDI motives; Taxonomy; Foreign Direct Investments;

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Find related papers by JEL classification:
F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
L23 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Organization of Production
L24 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Contracting Out; Joint Ventures

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