Motivation and Market Strategies of US Foreign Direct Investments: An Analysis of Host-Country Determinants

Abstract

During the past quarter-century there has been a major change in the predominant mode of strategic behaviour adopted by leading multinational enterprises (MNEs) in many industries. Up until the 1960s the prevalent approach was what Porter (1986) termed a multidomestic strategy, in which MNEs’ overseas subsidiaries focused on supplying the local markets of the countries in which they operated with products whose characteristics had already been essentially defined in the home country (or another major market) of the MNEs.¹ Each subsidiary thus had, to a great degree, its own competitive environment, with its rivals limited to other incumbents of that local market, be they indigenous firms or subsidiaries of other leading MNEs in the industry. In this context competition between MNEs could be seen as predominantly a series of separate contests between quite autonomous subsidiaries in specific national markets.