Is Outward FDI from Developing Countries a 'Good Thing'? Policy Implications for Home Countries

Rajneesh Narula, Professor of the- International Business Regulation at the Henley Business School, University of Reading, UK, presented a seminar on “Is Outward FDI from Developing Countries a ‘Good Thing’? Policy Implications for Home Countries” at the NCAER.

A number of developing countries – such as India – have seen a growth in outward FDI by domestic multinational enterprises over the last two decades. Many home countries (both developing and developed) have sought to encourage and promote such activity, arguing that such firms reflect their competitiveness and shifting comparative advantage. Other countries have reacted with alarm at outward FDI activity, feeling that it represents a ‘hollowing out’ of domestic assets-, and signals a decline in their competitiveness. Professor Narula contended that both can be true simultaneously, especially in those countries that have a ‘‘Lewisian’’ dual economy, such as India. There are costs and benefits associated with outward FDI. Professor Narula argued that there is a greater likelihood that such investments will result in capital flight rather than in opportunities for domestic upgrading, when generic approaches are applied.