Foreign direct investment and capability development: A dynamic capabilities perspective
Journal
Management International Review
Journal Volume
49
Journal Issue
5
Pages
585-605
Date Issued
2009
Author(s)
Hsu, C.-W.
Abstract
• This study uses a dynamic capabilities perspective to illustrate how global configurations of value chain activities are able to contribute to a firm's capability development through foreign direct investment. • Using Taiwanese firms as an empirical sample, we develop testable hypotheses regarding the impact of global configuration in terms of entry timing, entry location, and completeness of value chain activities. • Results indicate that foreign investment made by a multinational corporation (MNC) at an earlier time will enable a higher level of technological and manufacturing capability development than that made at a later time. We also find that MNCs are likely to make foreign investment in developed countries for the development of technological and marketing capabilities, and in less developed countries for the development of manufacturing capabilities. In addition, we discover that the more complete an MNC's value chain configuration is, the higher the level of capability development the MNC is likely to achieve. © 2009 Gabler-Verlag.
Subjects
Capability development; Dynamic capabilities; Entry location; Foreign direct investment; Global configuration; Value chain activities
Type
journal article