ABSTRACT
FDI outflows have largely originated in the traditionally capital surplus industrialized countries. Hence, the emergence of FDI outflows from some developing countries, first noticed in the early 1970s (see Lecraw, 1977), has aroused considerable academic and policy interest. After a decade of moderate but steady growth, annual magnitudes of outflows of FDI from developing countries have grown at a dramatic pace since the mid-1980s and have become a significant proportion of global FDI outflows. We argue that this sudden spurt in the magnitudes of annual flows of FDI from developing countries coincided with a change in the motivation for these flows. In the earlier round, developing country FDIs were of essentially market defensive type and were generally made in the neighbouring countries at a lower step in terms of levels of economic and technological development. In the current round, enterprises from developing countries, especially newly industrializing economies (NIEs) have increasingly used outward FDI as a strategic tool to strengthen their competitiveness in major markets. The evidence offered in support of this assertion consists of trends and patterns in the FDI outflows from developing countries indicating their motive for supporting price and non-price competitiveness of their manufactured exports, and case studies of government policy changes favouring outward flows in selected important sources of FDI among Asian developing countries. The chapter also comments on the implications of these trends for developing countries which are striving to attract greater magnitudes of FDI inflows as a bundle of much needed technology, capital and entrepreneurship in their effort to industrialize.
