Foreign direct investment - corporate social responsibility

Aires Conceicao Foreign Direct Investment and Public Policy (L8031) November 8, 2012

Session 10: Home country policies

Why should home countries permit – let alone encourage – outward FDI by their firms?

Contrary to my own personal belief, I was surprised to learn that outward foreign direct investment (FDI) can indeed have significant positive impacts on the home economy by increasing technology, labor skills as well as the competitiveness of local suppliers. Thus the effects of outward FDI, as those of inward FDI, can be beneficial both to the multinational enterprise (MNE) as well as to the host and, or, home country when a series of conditions are met. The counterfactual is also true, which argues that FDI can have less than desirable to outright detrimental consequences to the firm or countries involved when certain variables are missing. This paper will examine the advantages of outward FDI to the home country when these conditions are met. FDI and the Home Country MNEs are motivated first and foremost by profits and seek out to expand global operations to increase competitiveness by engaging in the international division