Title: Re-conceptualising exploitative and explorative FDI: a balancing-process approach to firm internationalisation

Authors: Minyoung Kim; Joseph T. Mahoney; Danchi Tan

Addresses: School of Business, The University of Kansas, Summerfield Hall, 1300 Sunnyside Avenue, Lawrence, KS 66045, USA ' Department of Business Administration, College of Business, University of Illinois at Urbana-Champaign, 1206 South Sixth Street, Champaign, IL 61820, USA ' Department of International Business, National Chengchi University, 64, Zhi-nan Rd. Sec. 2, Wenshan Taipei 116, Taiwan

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.

Keywords: foreign direct investment; Penrosean theory of growth; balancing process; motivation; location choice; exploitation-exploration; yin-yang; transparadox; exploitative FDI; explorative FDI; firm internationalisation; resource constraints.

DOI: 10.1504/EJIM.2015.071513

European Journal of International Management, 2015 Vol.9 No.5, pp.537 - 565

Received: 19 Jul 2013
Accepted: 06 Mar 2014
Published online: 31 Aug 2015 *

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