Introduction
This chapter introduces the reader to the topic addressed in the book. It is structured as follows.
First, we review a number of stylized facts regarding ODI from emerging economies and ODI from BRIC countries in particular.
Second, we detail our research questions, pertaining to the ODI involvement and the ODI-performance nexus of BRIC enterprises. Third, we discuss the main novelties of our approach and the intended contribution to the existing literature on internationalization and performance.
Forth, we review our main results that can be summarized as follows.
Concerning ODI involvement, our evidence suggests that BRIC firms engaged in ODI are in the minority. Moreover, within the group of BRIC investors, those firms having more than five foreign subsidiaries, investing in developing countries, or operating in joint ventures are in the minority. Concerning the relationship between ODI involvement and firm-level performance, we show that the best performing BRIC firms are more likely to engage in ODI. Moreover, within the group of BRIC investors, the best performing firms are more likely to rely on a large number of foreign subsidiaries and less likely to invest in developing countries alone, or to operate exclusively in joint ventures.
These results are robust to several econometric models, specifications, measures of performance and to the multiple versus single-country perspective.
Chapter 1. BRIC countries and Foreign Direct Investment: from IDI to ODI
In this chapter, we illustrate the transformation of BRIC countries from Inward Direct Investment (IDI) recipients into important sources of ODI and discuss the common patterns as well as the country specific features fostering this transformation.
According to UNCTAD World Investment Report 2017, in 1995 BRIC countries were on the receiving end of 13.5% of world IDI flows, whereas they contributed 1.1% of world ODI flows. In 2016, BRIC countries' share in world IDI and ODI flows were 15.7% and 13.5%, respectively. Despite some fluctuations, over the last two decades sustained growth in ODI flows is common to all BRIC countries.
The outstanding GDP annual growth rates experienced by BRIC countries since 1995 and their unexpected resilience throughout the financial crisis contribute to explain the transformation of BRIC countries from IDI recipients into ODI sources. Moreover, the recent slowdown of these countries' economies had a limited impact on ODI, mostly felt by Brazil and Russia. A number of country-specific factors-including institutional and regulatory arrangements - also account for the remarkable changes in ODI from BRIC countries. In the following, we summarize for each country the main determinants of aggregate ODI flows.
Brazilian firms have invested abroad since the late 1970s; however, it is only since the early 2000s that improved conditions in the domestic capital market have allowed firms in exporting sectors to raise capital on a large scale and to expand their market share abroad via ODI.[1] As in the past, Brazilian ODI is driven presently by conditions on the domestic capital market. Credit conditions have tightened in the wake of the 2007 financial crisis, which helps to explain why in recent years ODI flows declined. Brazil has not yet developed a policy framework in support of ODI. To date, the only interventions have been loans selectively offered to "national champions" by BNDES-the country major development bank-at an interest rate below market value.
Russia is among the largest investor countries worldwide. In the early 2000s, Russian conglomerates pursued natural and strategic resource-seeking ODI.[2] One decade later, there has been a shift toward investment in knowledge-based sectors and services. A distinctive feature of Russian internationalization is the prevalenc
About the Author:
Valeria Gattai is Associate Professor of Applied Economics at the Università degli Studi di Milano-Bicocca, Italy. She previously studied at Bocconi University, Italy and her research focuses on FDI and the theory of the firm.
Rajssa Mechelli is a doctoral student in the School of Economics and Finance at the Università Cattolica del Sacro Cuore, Italy. Her research focuses primarily on macroeconomic dynamics.
Piergiovanna Natale is full Professor of Economics at Università degli Studi di Milano-Bicocca, Italy. Having previously studied at the University of Exeter, UK, her research revolves around the theory of the firm and institutional design.
