Outward foreign direct investment and innovations from ASEAN and India: a synthesis

Abstract

Most transnational corporations from ASEAN and India had been long established and were market leaders with R&D capabilities in their home countries before starting. Most of them were not in high-tech sectors but in resource-based, mid-tech and services sectors. While market seeking is the most important outward foreign direct investment (OFDI) motivation, some firms investing in more developed countries to improve existing brand image, tap into skilled technicians and engineers available in advanced economies, gain strategic assets, collaborate with advanced knowledge sources to augment their existing capabilities and acquire new ones and build partnerships with more ‘senior’ partners from developed countries. Green-field investment was preferred. Nonetheless, some firms augmented their existing capabilities and acquire new ones by taking over companies in advanced economies. Knowledge is likely to flow from investing firms to its subsidiaries in a green-field investment. For a brown-field investment, knowledge flows may be one way or another or both. OFDI produced new-to-the firm, process rather than product innovations. Governments in developing countries with higher level of development and more technologically sophisticated firms might consider ‘strategically’ promoting OFDI can bring specific advantages to investing companies and their home economies by providing matching grants and private–public co-investment.