Motives and drivers for companies to invest abroad

Some invest abroad for financial motives.

Asian corporations have led the field in investing abroad.

Regional and global players What drives companies to invest abroad?

Some SMEs follow TNCs as their supplier firms in going abroad.

Push factors relate to economic environments in the home country as well as corporate strategies that encourage firms to go abroad.

Other supportive measures include streamlining OFDI approval procedures and the conditions governing equity ownership of affiliates abroad.

While American economists, politicians, and business leaders have for years sought to sell their model of management abroad, many companies elsewhere have not been buying it.

In particular, the Thai Exim Bank and the Board of Investment have been providing facilities (e.g. information, outward investment missions) to help Thai firms venture abroad.

The Government of Thailand has been encouraging and supporting OFDI by Thai companies.

It also indicated the increasing preference of leading SINTNCs to grow through acquisitions rather than new subsidiaries abroad.

Panellists debated the impact of incentives on the decision by transnational corporations to move services abroad.

First, the country's limited domestic market is a very significant push factor in propelling Singapore enterprises to expand their markets abroad.

Some two thirds of SINTNCs in the survey agreed that OFDI had increased their companies' competitive advantages.

Outward foreign direct investment (OFDI) by Singaporean companies has a long history.

To describe the nature and trends of OFDI by indigenous Singaporean enterprises

Many Chinese, Indian and Russian companies are investing abroad to access strategic assets and natural resources.

The Singapore Government and Singaporean companies, both large and SMEs, have a keen interest investing abroad.

In addition to participating directly in financing investments, IDC helps companies identify investment opportunities abroad.

These instruments include tax exemption on income remitted into the country by Malaysian companies investing overseas, the provision of investment guarantees and investment promotion missions abroad.

Corporate employers are even complaining about not being able to attract overseas talent.

On the other hand, companies might face domestic opposition when they decided to move certain services abroad.

What are the main obstacles to internationalization through OFDI, and how can they be removed? Are there any differences between OFDI by large companies and SMEs?

And the Indian government played a large part in fueling rupee appreciation by easing companies ability to borrow abroad.

Firms that reach that point, and that know themselves, then return more of their cash hoard to their investors, who invest it elsewhere.

Some Brazilian firms invest abroad to enhance their capabilities and reach, such as Odebrecht (construction), Gerdau (steel) and Ambev (beverages).

This encourages local companies to explore overseas investment opportunities that will enable them to enhance their competitiveness expand and grow.

OFDI allows many services SINTNCs to build stronger relationships with their existing customers and to develop new markets in the host countries.

Reasons for OFDI by SINTNCs, by host regions

For overseas branches, the net amount due to the local parent companies is taken as an approximation of the magnitude of direct investment.

This pattern was followed by Scandinavian TNCs expanding abroad in the late nineteenth century and early twentieth centuries (Johanson and Vahlne 1977).

These clients view foreign presence as an indication of the competitiveness of SINTNCs.

The OFDI motivations for SMEs are in general similar to those for larger firms.

In order to transform the funds into renminbi outflows, the firms then increase the scale of renminbi settlements in cross border trades.

And Chinese firms too often state owned are seeking greater investment opportunities abroad in major industries, particularly energy.

Regular seminars on internationalization issues could include exchanges of experiences among companies (larger and smaller) that have been successful in internationalizing and those that have faced and overcome challenges in venturing abroad.

In the name of internationalization, BNDES funding for Brazilian enterprises overseas increased 1185 percent in ten years, according to a study by Ibase.

Tenaris Siderca (steel) is one of the successful Argentine companies investing abroad and is developing a global production network for seamless steel pipes.

For outward FDI, protectionism involves measures that require domestic companies to repatriate assets or operations to the home country, or that discourage certain types of new investments abroad.

But the most notable development of recent years has been the surge in China s outward FDI since the government adopted its go global policy in 2000, encouraging Chinese firms to invest overseas. China s outward FDI more than doubled in 2005 2007, from 12 billion to 27 billion, and then more than doubled again in 2008, to 56 billion.

German firms reacted by outsourcing the labor intensive parts of their production chains and curtailing their investment in Germany.

One fifth of respondents named these factors as an outcome of their OFDI activities.

This geographical concentration of OFDI suggests that while OFDI by Singaporean firms has a strong historical tie, it is happening to only a limited range of Singaporean companies.

However, market presence is the single most important reason in explaining OFDI by SINTNCs.

Assistance to smaller firms with little experience in investment projects abroad and with limited financial means is particularly important, especially in the first stages of the investment process.