Template-type: ReDIF-Paper 1.0
Author-Name: Narula, Rajneesh
Author-Email: r.narula@henley.reading.ac.uk
Author-Workplace-Name: John H. Dunning Centre for International Business,
	 Henley Business School, University of Reading
Title: Much ado about nothing, or sirens of a brave new world?: MNE activity from 
	 developing countries and its significance for development.
Abstract: This paper examines the evidence on developing country MNEs and outward 
	 FDI activity. We do not find evidence of an across-the-board growth in 
	 outward FDI from developing countries, either in magnitude, or 
	 geographically. Such growth is a narrow phenomenon, limited to a small 
	 group of home countries with relatively well-developed knowledge 
	 infrastructure, as well as innovation and business systems. These ‘new’ 
	 MNEs have been spurred by greater competition through liberalisation, 
	 and have sought to survive by upgrading of their firm-specific assets 
	 and one means to do so has been by internationalisation. Broadly 
	 speaking, much of the rapid expansion of DC MNE activity from countries 
	 such as India is not sustainable. We also discuss the effect of outward 
	 FDI on the knowledge base of the home countries of DC MNEs, as well as 
	 the role of DC MNEs in promoting South-South capital and knowledge 
	 flows. We argue that DC MNEs are not a superior option to conventional 
	 MNEs, as there are few differences in their modus operandi. Besides, 
	 MNE-assisted development still depends upon the capacity of the host 
	 country to efficiently utilise the spillovers and linkages potentially 
	 made available. Many of the DC host countries have endemic political 
	 instability, poor transport links and infrastructure, little skilled 
	 manpower and are distant from the most important markets. If developing 
	 countries are to attract more sophisticated projects they must provide 
	 stability, human capital, infrastructure and reliability.
Classification-JEL: F23, L52, O14, O19
Keywords: FDI, MNEs, developing countries, development, absorptive capacity,
	 knowledge flows, south-south, emerging markets
Series: UNU-MERIT Working Papers
Creation-Date: 2010
Number: 021
File-URL: http://www.merit.unu.edu/publications/wppdf/2010/wp2010-021.pdf
File-Format: application/pdf
File-Size: 275 Kb
Handle: RePEc:unm:unumer:2010021