Outward FDI from Developing Country MNEs as a Channel for Technological Catch-up

Abstract

One of the more recent aspects of the globalization process is

the rise and the increasing outward expansion of multinational

enterprises (MNEs) from developing countries. Among the more

promising effects of this phenomenon is a potentially positive development

impact: through outward foreign direct investment (OFDI)

developing country MNEs acquire new knowledge, which contributes

to the technological catch-up of their home countries. This paper

reviews the recent literature on OFDI from developing countries,

with a critical focus on the theory and evidence of FDI as a channel

for technological catch-up. This literature suggests that the

features and global business environment of current emerging country

MNEs is different from those of latecomer firms in earlier

decades. Modularity of production in an increasing number of

sectors, combined with weak national innovation systems (NIS) in

many developing countries explain why the sourcing of strategic

assets ― including technology and innovation ― from abroad through

OFDI has become such an important channel for technological

catch-up.