What Can Emerging Markets Learn from the Outward Direct Investment Policies of Advanced Countries?

In scholarly and political circles, the economic gains to a country of attracting inward foreign direct investment (IFDI) are now largely uncontested. Such investments are generally perceived to bring a number of benefits to a host economy, not least in relation to employment, productivity levels, organizational and managerial practices, backward and forward linkages, technology, and greater participation in the international division of labor (Buckley and Casson 1998). In recognition of these benefits, much of the policy debate concerning foreign direct investment (FDI) has revolved around IFDI policies and international investment agreements (IIAs), with capital exporting countries usually seeking greater market access, nondiscriminatory treatment, and investment protection in host countries that improves the competitiveness of their own multinational enterprises (MNEs), and developing countries offering increasingly attractive investment policy regimes (UNCTAD 1995). One outcome is that policies toward IFDI have now become relatively well established, wide ranging, and transparent among both developed and developing countries. At the same time, our understanding of the relationship between policy and inward investing firm behavior is reasonably well advanced (Rugman and Brewer 2001).