Historical ties and foreign direct investment: An exploratory study
- 751 Downloads
Recent research suggests that the distance between countries in terms of culture, institutions, geographic proximity, and economic development matters in the foreign direct investment (FDI) decisions made by firms. This study focuses on the historical ties between countries as an additional factor affecting such decisions. In particular, it examines three major historical factors that affect cross-country ties with Vietnam, namely, Chinese occupation and conflict, French colonization, and socialist ideology, and examines the ways in which these historical ties have influenced FDI. The database consists of 631 wholly owned subsidiaries and 1215 joint ventures formed in Vietnam by multinational enterprises from 35 countries and regions between 1989 and 1999. The results indicate that firms from Hong Kong, Taiwan, France, and former and current socialist countries tended to be early movers in Vietnam, whereas firms from Mainland China tended to be late movers. Using the example of Vietnam, this study clearly shows that historical ties can provide additional explanatory power regarding FDI decisions beyond the conventional distance variables.
Keywordsforeign direct investment history of FDI and the MNE markets and institutions Southeast Asia relational embeddedness
We thank Sea Jin Chang, Lorraine Eden, Don Lessard, Arjen Slangen, Fabienne Fortanier, Rob van Tulder, Takehiko Isobe, and Christine Chan for their comments. An earlier version of this article was presented at the 2009 Academy of International Business Conference, San Diego, USA. This paper was supported by a grant from the Research Grants Council of the Hong Kong Special Administrative Region (Project No. CUHK 451010H).
- Ghemawat, P. 2001. Distance still matters: The hard reality of global expansion. Harvard Business Review, 79 (8): 137–147.Google Scholar
- Hiebert, M., Thayer, N., & Chanda, N. 1993. French dressing. Far Eastern Economic Review, 156 (8): 10–11.Google Scholar
- Hofstede, G. 1980. Culture’s consequences. New York: Sage.Google Scholar
- Jenkins, R. 2006. Globalization, foreign investment and employment in Viet Nam. Transnational Corporations, 15 (1): 115–142.Google Scholar
- Jones, G. 1996. The evolution of international business: An introduction. London: Routledge.Google Scholar
- Kostova, T., & Zaheer, S. 1999. Organizational legitimacy under conditions of complexity: The case of the multinational enterprise. Academy of Management Review, 24 (1): 64–81.Google Scholar
- Nørlund, I. 1991. The French Empire, the colonial state in Vietnam, and economic policy: 1885–1940. Australian Economic History Review, 31 (1): 72–89.Google Scholar
- Slangen, A., Fortanier, F., & van Tulder, R. 2007. The importance and dynamics of types of distance: An empirical test of Ghemawat’s CAGE framework. Paper presented at the annual meeting of the Academy of Management, Philadelphia, USA.Google Scholar
- Twomey, M. J. 2000. A century of foreign investment in the Third World. London: Routledge.Google Scholar
- Xu, D., & Shenkar, O. 2002. Institutional distance and the multinational enterprise. Academy of Management Review, 27 (4): 608–618.Google Scholar