Re-conceptualising exploitative and explorative FDI: A balancing-process approach to firm internationalisation

Minyoung Kim, Joseph T. Mahoney, Danchi Tan

Research output: Contribution to journalArticle

Abstract

Drawing on the Penrosean theory of the growth of the firm, this paper develops a balancing-process approach to explain the motivations and location choices of Foreign Direct Investment (FDI). In this approach, FDI is viewed as a means to balance a firm's portfolio of resources and capabilities through utilising resources and capabilities available in international markets with the ultimate goal of achieving fast and sustainable growth. Based on the Chinese yin-yang perspective, this approach joins exploitative and explorative FDI as a dynamic unity and explains how exploitation and exploration jointly drive a firm's motivation and location choice of internationalisation. Our balancing-process approach joins historically independent streams of research in a single framework and uncovers a new and more fundamental mechanism that drives FDI: The need to address resource constraints.

Original languageEnglish (US)
Pages (from-to)537-565
Number of pages29
JournalEuropean Journal of International Management
Volume9
Issue number5
DOIs
StatePublished - Jan 1 2015

Keywords

  • Balancing process
  • Exploitation-exploration
  • Foreign direct investment
  • Location choice
  • Motivation
  • Penrosean theory of growth
  • Transparadox
  • Yin-yang

ASJC Scopus subject areas

  • Business and International Management
  • Organizational Behavior and Human Resource Management
  • Education

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