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

  • Oxelheim, Lars

    ()

    (The Research Institute of Industrial Economics)

  • Randøy, Trond

    ()

    (Agder University College and Agder Reserch Foundation)

  • Stonehill, Arthur

    (University of Hawaii at Manoa)

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.

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File URL: http://www.ifn.se/Wfiles/wp/WP554.pdf
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Paper provided by Research Institute of Industrial Economics in its series Working Paper Series with number 554.

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Length: 30 pages
Date of creation: 25 Apr 2001
Date of revision:
Publication status: Published in International Business Review, 2001, pages 381-398.
Handle: RePEc:hhs:iuiwop:0554
Contact details of provider: Postal: Research Institute of Industrial Economics, Box 55665, SE-102 15 Stockholm, Sweden
Phone: +46 8 665 4500
Fax: +46 8 665 4599
Web page: http://www.ifn.se/
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