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On the Treatment of Finance-Specific Factors Within the OLI Paradigm

Author

Listed:
  • Oxelheim, Lars

    () (The Research Institute of Industrial Economics)

  • Randøy, Trond

    () (Agder University College and Agder Reserch Foundation)

  • Stonehill, Arthur

    (University of Hawaii at Manoa)

Abstract

This article argues that the body of foreign direct investment (FDI) literature in general and the ownership, location, and internalization (OLI) paradigm in particular would be enriched if finance-specific factors are explicitly incorporated as drivers of FDI. We suggest that financial strategies involving factors such as debt/equity swaps or equity-listings in foreign equity markets affect the firm’s relative cost and availability of capital, and motivate a firm’s engagement in FDI. Large, research-intensive firms, predominantly resident in the US, UK, Japan or other liquid markets, have in the literature been identified as typical prototypes of MNEs undertaking FDI. These firms are assumed to have no restrictions as regards their ability to achieve a competitive cost and availability of capital, a focus that has made financial capabilities and resources less of an issue in FDI research. Our article mitigates this by emphasizing the relevance of finance-specific proactive strategies for FDI to occur. We generate eight testable hypotheses based on the recognition of finance-specific factors as active drivers of value creating FDI.

Suggested Citation

  • Oxelheim, Lars & Randøy, Trond & Stonehill, Arthur, 2001. "On the Treatment of Finance-Specific Factors Within the OLI Paradigm," Working Paper Series 554, Research Institute of Industrial Economics.
  • Handle: RePEc:hhs:iuiwop:0554
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    Cited by:

    1. repec:eee:iburev:v:27:y:2018:i:1:p:231-245 is not listed on IDEAS
    2. Uddin, Moshfique & Boateng, Agyenim, 2011. "Explaining the trends in the UK cross-border mergers & acquisitions: An analysis of macro-economic factors," International Business Review, Elsevier, vol. 20(5), pages 547-556, October.
    3. Lars Oxelheim & Trond Randøy & Arthur Stonehill, 2012. "What can international finance add to international strategy?," Chapters,in: Handbook of Research on International Strategic Management, chapter 12, pages 238-253 Edward Elgar Publishing.
    4. Jones, Chris & Temouri, Yama, 2016. "The determinants of tax haven FDI," Journal of World Business, Elsevier, vol. 51(2), pages 237-250.
    5. repec:spr:manint:v:54:y:2014:i:1:d:10.1007_s11575-013-0194-z is not listed on IDEAS
    6. Forssbaeck, Jens & Oxelheim, Lars, 2008. "Finance-specific Factors as Drivers of Cross-border Investment – An OLI Perspective," Working Paper Series 767, Research Institute of Industrial Economics.
    7. Oxelheim, Lars & Ghauri, Pervez, 2008. "EU-China and the non-transparent race for inward FDI," Journal of Asian Economics, Elsevier, pages 358-370.
    8. Mersland, Roy & Randøy, Trond & Strøm, Reidar Øystein, 2011. "The impact of international influence on microbanks' performance: A global survey," International Business Review, Elsevier, vol. 20(2), pages 163-176, April.
    9. Forssbæck, Jens & Oxelheim, Lars, 2011. "Corporate financial determinants of foreign direct investment," The Quarterly Review of Economics and Finance, Elsevier, vol. 51(3), pages 269-282, June.
    10. Forssbæck, Jens & Oxelheim, Lars, 2008. "Finance-specific factors as drivers of cross-border investment--An empirical investigation," International Business Review, Elsevier, vol. 17(6), pages 630-641, December.
    11. Guillamon-Saorin, Encarna & Sousa, Carlos M.P., 2010. "Press release disclosures in Spain and the UK," International Business Review, Elsevier, vol. 19(1), pages 1-15, February.
    12. repec:eee:iburev:v:27:y:2018:i:1:p:113-124 is not listed on IDEAS
    13. Braunerhjelm, Pontus & Oxelheim, Lars & Thulin, Per, 2005. "The relationship between domestic and outward foreign direct investment: The role of industry-specific effects," International Business Review, Elsevier, pages 677-694.
    14. Lien, Yung-Chih & Piesse, Jenifer & Strange, Roger & Filatotchev, Igor, 2005. "The role of corporate governance in FDI decisions: Evidence from Taiwan," International Business Review, Elsevier, vol. 14(6), pages 739-763, December.
    15. Pease, Stephanie & Paliwoda, Stanley & Slater, Jim, 2006. "The erosion of stable shareholder practice in Japan ("Anteikabunushi Kosaku")," International Business Review, Elsevier, vol. 15(6), pages 618-640, December.
    16. Boateng, Agyenim & Hua, Xiuping & Uddin, Moshfique & Du, Min, 2014. "Home country macroeconomic factors on outward cross-border mergers and acquisitions: Evidence from the UK," Research in International Business and Finance, Elsevier, vol. 30(C), pages 202-216.

    More about this item

    Keywords

    FDI; Cost of capital; Financial strategies; OLI;

    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
    • G34 - Financial Economics - - Corporate Finance and Governance - - - Mergers; Acquisitions; Restructuring; Corporate Governance
    • M21 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - Business Economics

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