Re-conceptualising exploitative and explorative FDI: a balancing-process approach to firm internationalisation
by Minyoung Kim; Joseph T. Mahoney; Danchi Tan
European J. of International Management (EJIM), Vol. 9, No. 5, 2015

Abstract: Drawing on the Penrosean theory of the growth of the firm, this paper develops a balancing-process approach to explain the motivations and location choices of Foreign Direct Investment (FDI). In this approach, FDI is viewed as a means to balance a firm's portfolio of resources and capabilities through utilising resources and capabilities available in international markets with the ultimate goal of achieving fast and sustainable growth. Based on the Chinese yin-yang perspective, this approach joins exploitative and explorative FDI as a dynamic unity and explains how exploitation and exploration jointly drive a firm's motivation and location choice of internationalisation. Our balancing-process approach joins historically independent streams of research in a single framework and uncovers a new and more fundamental mechanism that drives FDI: the need to address resource constraints.

Online publication date: Mon, 31-Aug-2015

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