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Table 2: Motivations for Foreign Direct Investment by the New Multinational Enterprises

Motivation

Description

References

Backward linkage into raw materials

Firm seeks to secure supplies of crucial inputs in the face of uncertainty or asset specificity.

Lall 1983; Wells 1983; Fields 1995; UNCTAD 2006

Forward linkage into foreign markets

Firm seeks to secure access to the market in the presence of asset specificity.

Wells 1983; Fields 1995; UNCTAD 2006

Home-country government curbs

Firm attempts to overcome growth restrictions imposed by the government in its home market.

Lall 1983; Wells 1983; UNCTAD 2006

Spreading of risk

Firm locates assets in different countries to manage risk.

Lecraw 1977

Move personal capital abroad

Firm invests abroad so that owner(s) diversify their exposure to any one country.

Wells 1983

Follow a home-country customer to foreign markets

Firm follows home-country customers as they expand horizontally to other countries.

Wells 1983; UNCTAD 2006

Invest in new markets in response to economic reforms in the home country

Firm enjoying monopolistic or oligopolistic position in the home market is threatened by liberalization, deregulation and/or privatization policies.

Guillén 2005; Goldstein 2007

Acquire firm-specific intangible assets

Firm invests or acquires assets in more developed countries.

Lall 1983; UNCTAD 2006

Exploit firm-specific intangible assets

See Table 3

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