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This process of “reverse” foreign direct investment from home countries at a lower level of development than the host countries to which it is directed is only anomalous in a superficial way. The overall level of development of a country, as measured by such aggregate indicators as GDP per capita, more likely than not conceals a heterogeneous mix of backward and world-class industries and firms. Many countries around the world include pockets or enclaves of excellence surrounded by relatively mediocre or even inefficient producers. The literature on geographical clusters and agglomeration economies has shown that firms build capabilities as they interact with others located in close proximity (Cortright, 2006; Porter, 1998). This literature emphasizes that the country level of analysis is not the appropriate one for understanding the impact of location and geography. Ironically, one of the facilitating factors in the development of these clusters and enclaves of excellence could be incoming FDI and outsourcing agreements from firms located in developed countries that contributed to the formation of industrial clusters in less developed ones (McKendrik et al. 2001; Meyer, 2004).

The new MNEs have tended to follow some of the patterns of expansion consistent with product-life cycle and staged theories of internationalization, as they have tended to expand first into countries located within the same region (Lall 1983; Wells 1983; Goldstein 2007). In addition, when stepping outside their home region, they have tended to emphasize areas culturally, politically or economically similar, as in the case of the Spanish firms’ expansion into Latin America (Guillén 2005). However, notable exceptions to this pattern have to do with investments in search of strategic assets (Goldstein 2007:85-87) and the rapid pace at which they have expanded their global reach (Matthews 2006).

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