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Re-orienting the paradigm: path dependence in FDI theory and the emerging multinationals

Re-orienting the paradigm: path dependence in FDI theory and the emerging multinationals PurposeThe purpose of this paper is to analyze how path dependence in the evolution of major theories of foreign direct investment (FDI) locked in a theoretical perspective of the multinational enterprise that focused on asset-exploitation. This perspective is challenged by recent contradicting observations of multinationals from China and other emerging economies. A decisive re-orientation of FDI theory is proposed as a way forward to resolve this tension.Design/methodology/approachPlacing FDI theories into the context of FDI patterns prevailing at the time they were developed, Thomas Kuhn’s framework on the evolution of scientific knowledge is employed to track how the mainstream FDI theory emerged, went through a period of normal science and then approached a crisis of science in this field.FindingsThe evolution of FDI theory is strongly path-dependent, which made it difficult for theory to effectively incorporate new conceptual discoveries and empirical findings about the nature of FDI activity.Originality/valueFDI theory would benefit from a full re-orientation to a demand-oriented perspective which places the pursuit of advantages, assets, resources, etc., at the core of the theory. Such a change is implicit in many recent theoretical advances and would assure theory is generalizable to all types of FDI. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png International Journal of Emerging Markets Emerald Publishing

Re-orienting the paradigm: path dependence in FDI theory and the emerging multinationals

International Journal of Emerging Markets , Volume 14 (1): 19 – Jan 21, 2019

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Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1746-8809
DOI
10.1108/IJoEM-04-2017-0123
Publisher site
See Article on Publisher Site

Abstract

PurposeThe purpose of this paper is to analyze how path dependence in the evolution of major theories of foreign direct investment (FDI) locked in a theoretical perspective of the multinational enterprise that focused on asset-exploitation. This perspective is challenged by recent contradicting observations of multinationals from China and other emerging economies. A decisive re-orientation of FDI theory is proposed as a way forward to resolve this tension.Design/methodology/approachPlacing FDI theories into the context of FDI patterns prevailing at the time they were developed, Thomas Kuhn’s framework on the evolution of scientific knowledge is employed to track how the mainstream FDI theory emerged, went through a period of normal science and then approached a crisis of science in this field.FindingsThe evolution of FDI theory is strongly path-dependent, which made it difficult for theory to effectively incorporate new conceptual discoveries and empirical findings about the nature of FDI activity.Originality/valueFDI theory would benefit from a full re-orientation to a demand-oriented perspective which places the pursuit of advantages, assets, resources, etc., at the core of the theory. Such a change is implicit in many recent theoretical advances and would assure theory is generalizable to all types of FDI.

Journal

International Journal of Emerging MarketsEmerald Publishing

Published: Jan 21, 2019

References