The impact of foreign direct investment upon parent companies' competitiveness : an empirical study on Singaporean industrial multinational enterprises
Academic research on foreign direct investment (FDI) has concentrated primarily on its motives and means of market entry. In contrast, comparatively little work has examined the impact of FDI upon an investing firm, and of this, the focus has in the main concentrated on just one dimension, namely the impact upon its financial performance. This study argues for the need to incorporate non-financial measures such as the impact of FDI upon an investing MNE's performance in key functional areas that include its technology, production, marketing, human resource and procurement management. It also argues for the need to assess the impact of FDI through detailed case studies on individual MNEs. It presents empirical evidence gathered from three Singaporean industrial MNEs: Yeo Hiap Seng Limited, Wearnes Brothers Limited and Times Publishing Limited. The findings confirm that the diversity of environments which they are exposed to, provides them with multiple stimuli and subsequently allows them to develop capabilities and learning opportunities not open to domestic firms. The findings also strongly suggest that all the three case companies see the current losses incurred by their overseas subsidiaries as part of the price they are willing to pay in order to achieve their long-range corporate goals. Indeed, despite suffering from poor financial returns from their FDI, all of them regard their foreign operations as "successful" in marketing and/or technical terms. In other words, this study refutes the body of literature (i.e. explanations of FDI based on economics) which suggests that a firm will undertake FDI particularly only in those countries where it perceives the highest gain in financial returns. Conversely, this study suggests that a firm's choice of foreign market entry mode will depend on its strategic motives for overseas expansion. It also strongly suggests that MNEs are willing to accept trade-offs (e.g. short-term profits) for their long-term corporate goals (e.g. to establish an integrated manufacturing and marketing network in their major markets and/or increase overseas market share). Lastly, this study provides conclusive empirical evidence to demonstrate that the performance of an MNE's particular overseas investment and its impact upon the parent company's competitiveness has significant influence upon its subsequent FDI decisions and characteristics.