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Linking inward/outward FDI and exploitation/exploration strategies: Development of a framework for SMEs

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  • Kang, Yuanfei
  • Scott-Kennel, Joanna
  • Battisti, Martina
  • Deakins, David

Abstract

The purpose of this paper is to examine the relationships between exploitation/exploration strategy and foreign direct investment (FDI) involving small and medium-sized enterprises (SMEs). Drawing on qualitative data collected from 45 FDI projects reported by 38 SMEs in a small open economy (SMOPEC), we develop an empirically grounded framework and research propositions that suggest inward FDI (into the SME) is associated with exploration driven by a strategic asset-seeking motive, and outward FDI (by the SME) is associated with exploitation driven by market and efficiency-seeking motives. Further, for the SMEs in this study, ambidextrous exploration and exploitation appear complementary and co-occur either simultaneously through an inward FDI project, or sequentially through separate inward and outward FDI projects, respectively. Our findings, however, reveal a lack of clear sequencing between inward and outward FDI, in contrast to previous research that has conceptualised inward FDI as a strategic means to achieve outward FDI. Implications for theory, practice and policy are discussed.

Suggested Citation

  • Kang, Yuanfei & Scott-Kennel, Joanna & Battisti, Martina & Deakins, David, 2021. "Linking inward/outward FDI and exploitation/exploration strategies: Development of a framework for SMEs," International Business Review, Elsevier, vol. 30(3).
    • Handle: RePEc:eee:iburev:v:30:y:2021:i:3:s096959312030144x
    DOI: 10.1016/j.ibusrev.2020.101790
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