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Supply chain capability as a determinant of FDI

Supply chain capability as a determinant of FDI Purpose – The choice of an investment location by a multinational enterprise (MNE) is determined not only by firm‐specific variables that define the motive of foreign direct investment (FDI), but is also determined by variables that define locational aspects. The purpose of this paper is to report on the study of the constituents of production and logistics environment of a host country and its effect on FDI decisions of MNEs. The concept is introduced of supply chain capability (SCC) of countries, a long‐run variable based on the production and logistics environment, as shaping the FDI of MNEs. Design/methodology/approach – The research uses regression analyses on secondary data to test the research hypotheses. Findings – The analysis substantiates the basic proposition of SCC of a country being a determinant of FDI, and that its effect varies with the size of the host country's economy. Further, the study suggests a differential impact of SCC on developing and developed countries. The study also confirms that SCC is a determinant of vertical and export‐platform FDI but not of horizontal FDI. Research limitations/implications – The study has limitations, in that the unit of analysis is a country. Countries, however, are not homogeneous in their SCC. Thus, regional differences or sectoral differences have not been taken into account. Originality/value – By providing a holistic view, SCC helps MNEs in taking a more integrated view of a location's attractiveness. The study also has relevance and prescriptive value, especially for small developing countries which are seeking to improve their attractiveness as a FDI destination. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Multinational Business Review Emerald Publishing

Supply chain capability as a determinant of FDI

Arshad Alam; Prabir K. Bagchi
Multinational Business Review , Volume 19 (3): 21 – Aug 19, 2011
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References (51)

Publisher
Emerald Publishing
Copyright
Copyright © 2011 Emerald Group Publishing Limited. All rights reserved.
ISSN
1525-383X
DOI
10.1108/15253831111172658
Publisher site
See Article on Publisher Site

Abstract

Purpose – The choice of an investment location by a multinational enterprise (MNE) is determined not only by firm‐specific variables that define the motive of foreign direct investment (FDI), but is also determined by variables that define locational aspects. The purpose of this paper is to report on the study of the constituents of production and logistics environment of a host country and its effect on FDI decisions of MNEs. The concept is introduced of supply chain capability (SCC) of countries, a long‐run variable based on the production and logistics environment, as shaping the FDI of MNEs. Design/methodology/approach – The research uses regression analyses on secondary data to test the research hypotheses. Findings – The analysis substantiates the basic proposition of SCC of a country being a determinant of FDI, and that its effect varies with the size of the host country's economy. Further, the study suggests a differential impact of SCC on developing and developed countries. The study also confirms that SCC is a determinant of vertical and export‐platform FDI but not of horizontal FDI. Research limitations/implications – The study has limitations, in that the unit of analysis is a country. Countries, however, are not homogeneous in their SCC. Thus, regional differences or sectoral differences have not been taken into account. Originality/value – By providing a holistic view, SCC helps MNEs in taking a more integrated view of a location's attractiveness. The study also has relevance and prescriptive value, especially for small developing countries which are seeking to improve their attractiveness as a FDI destination.

Journal

Multinational Business Review – Emerald Publishing

Published: Aug 19, 2011

Keywords: Multinational enterprises; Supply chain capability; Foreign direct investment; Supply environment; Decision making

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