The issue of motivation for foreign direct investment (FDI) is central to international business (IB) theory and empirical research. The most common starting point is Dunning’s four motives (4M) framework: market seeking, natural resource seeking, efficiency seeking and strategic asset seeking. This paper explores the genesis, development and application of the 4M framework and demonstrate how it has developed from an abstract typology and heuristic device unsupported by empirical evidence into a set of concrete behavioral assumptions with theoretical and methodological consequences for IB research.
The paper is mainly conceptual, based on relevant theoretical work on FDI motives, and partly methodological, concentrating on the importance of realism for behavioral assumptions in IB.
The authors demonstrate that the shift in the 4M framework from abstract typology to a set of concrete behavioral assumptions has important implications for the development of IB theory and methodology. A critical issue has largely been ignored: the role of realism in the assumptions on which theory and its empirical testing are based and the possible consequences of unrealism in key behavioral assumptions. The authors show that attempts to “fix” the problems inherent in the 4M framework will inevitably fail and suggest ways in which it is possible to inject more realism into behavioral assumptions underlying FDI motivation.
The authors demonstrate that the applicability of the 4M approach, for either firms or policymakers seeking to attract FDI and maximize the benefits from it, needs to be more clearly understood in the context of the particular decision.
Many countries see the attraction of FDI as central to their plans for economic growth and indeed the propensity for industrial development and moving up the value chain. The understanding of FDI motive has, in recent years, been recognized as central to this. The authors offer an important nuance to this understanding.
The paper offers both theoretical and methodological insights for IB scholars interested in FDI motivation.
