Determinants of Emerging Market Foreign Direct Investments in the UK

Abstract

Although Emerging Market (EM) Outward Foreign Direct Investment (OFDI) has become an increasingly significant phenomenon in recent years, research regarding EM OFDI to Developed Markets (DMs) remains at an ‘emerging’ stage. This thesis seeks to address this shortfall through the following research questions: 1) what are the determinants of EM OFDI to the UK, and 2) what are the influencing factors of subsequent investment decisions of EM firms within the UK? Considering the distinctiveness of EM OFDIs in their firm-specific characteristics, given circumstances and motivations, this thesis applies an adapted ‘Resource-based view (RBV)’ framework and institutional theory to build a theoretical framework. Within this the hypotheses/propositions regarding ‘strategic-asset seeking’, ‘market-seeking’ and ‘institution-seeking’ motivations of EM OFDI, which reflect both ‘pull factors’ (advantages in hosts) and ‘push factors’ (disadvantages at home), are developed. Panel analysis was conducted to address the first research question with Greenfield data only due to data availability. Additionally, a case study was conducted; firstly, for the purpose of triangulation; secondly, to supplement the panel analysis results with M&A data; and lastly, to address the second research question. Both panel and case study analysis results generally support the major theoretical assumptions of this thesis, although the ‘market seeking’ motivation variable in panel analysis has statistically insignificant coefficient and there is a lack of case study data to support the ‘institutional push factor’. This thesis contribute to the body of knowledge of FDI and IB area 1) by providing an adjusted theoretical framework for the analysis of EM OFDI to DM with a novel application of institutional theory and RBV; and 2) by qualifying and extending existing works on EM OFDI by including a wider range of EM source countries and DM hosts whilst extending the scope of study to the less-researched ‘post-investment stage’ of EM OFDI, with empirical analysis results as well as theoretical suggestions.