International Business and FDI
Research Guide

Barney (1991) in 'Firm Resources and Sustained Competitive Advantage' argues that strategic resources must be valuable, rare, imperfectly imitable, and non-substitutable to provide sustained competitive advantage. These resources are heterogeneously distributed across firms and stable over time. This framework applies to multinational enterprises expanding via FDI.

Johanson and Vahlne (1977) in 'The Internationalization Process of the Firm—A Model of Knowledge Development and Increasing Foreign Market Commitments' describe internationalization as a process of knowledge development and gradually increasing foreign market commitments. Firms start with exports and progress to FDI as psychic distance decreases and experiential knowledge grows. Johanson and Vahlne (2009) in 'The Uppsala internationalization process model revisited: From liability of foreignness to liability of outsidership' update it to emphasize relationships and overcoming outsidership.

Kogut and Singh (1988) in 'The Effect of National Culture on the Choice of Entry Mode' find that national culture affects preferences for joint ventures over wholly-owned subsidiaries. Greater cultural distance increases equity-based entry modes to mitigate uncertainty. This shapes FDI decisions in international business.

Borensztein et al. (1998) in 'How does foreign direct investment affect economic growth?' show FDI boosts growth more than non-FDI capital flows when host countries have sufficient human capital. Threshold effects indicate FDI technology transfer requires secondary schooling above 0.68 years per capita. Local financial development mediates these benefits.

Dunning (1988) in 'The Eclectic Paradigm of International Production: A Restatement and Some Possible Extensions' posits that FDI occurs when ownership, location, and internalization advantages combine. Ownership advantages stem from firm-specific assets, location from host country factors, and internalization from controlling transactions internally. This OLI framework explains multinational enterprise activity.

Helpman et al. (2004) in 'Export Versus FDI with Heterogeneous Firms' model that firms with productivity above a cutoff (top 18%) select FDI over exports due to lower variable costs of subsidiaries despite sunk entry costs. This sorting amplifies productivity differences across modes. Multi-country general equilibrium shows welfare implications from market access choices.