Foreign direct investment motivations and knowledge acquisition from MNEs in overseas subsidiaries

• Published date: 01 June 2014
• DOI: http://doi.org/10.1002/cjas.1278
• Author: Jiyul Choi,Byung Il Park
• Date: 01 June 2014

Foreign direct investment motivations and

knowledge acquisition from MNEs in overseas

subsidiaries

†

Byung Il Park*and Jiyul Choi

Hankuk University of Foreign Studies

Abstract

Despite studies exploring factors affecting knowledge

acquisition from multinational enterprises in subsidiaries,

what accounts for a successful acquisition is unresolved.

We argue that such disparity may stem from inattention to

investment motivations of multinational enterprises (MNEs)

in foreign markets and to the fact that learning patterns

of subsidiaries can be inf‌luenced by foreign f‌irms’

market-seeking or eff‌iciency-seeking behaviors. We f‌ind

that absorptive capacity in learning organizations and

daily interactions with knowledge possessors are

essential to learning from parent f‌irms. In addition,

active support from parent f‌irms is particularly crucial

for subsidiaries seeking to improve operational eff‌iciency

of MNEs. We also suggest that potential absorptive

capacity plays a catalyst role in initiating knowledge

acquisition, particularly in cases where MNEs have

market-seeking motivations. Copyright © 2014 ASAC.

Published by John Wiley & Sons, Ltd.

Keywords: investment motivations, market-seeking,

eff‌iciency-seeking, knowledge acquisition, subsidiary

absorptive capacity, MNEs

Résume

Même si des études explorent les facteurs inf‌luençant

l’acquisition, dans les f‌iliales, des connaissances issues des

entreprises multinationales, les éléments qui témoignent d’une

acquisition réussis restent méconnus. D’après cette étude, une

telle disparité serait attribuable à l’inattention accordée aux

motivations d’investissements des multinationales (MNEs)

dans les marchés étrangers et au fait que les patrons

d’apprentissage des f‌iliales peuvent être inf‌luencés parla quête

du marché ou par des comportements en quête d’eff‌icacité. Les

résultats révèlent que dans les organismes d’apprentissage, le

pouvoir d’absorption et les interactions quotidiennes avec les

dépositaires de la connaissance sont essentiels à l’apprentissage

des f‌irmes parentes. Par ailleurs, le soutien actif des f‌irmes

parentes est d’une importance capitale pour les f‌iliales

qui souhaitent améliorer l’eff‌icacité opérationnelle des

MNEs. Enf‌in, le pouvoir d’absorption potentiel joue un rôle

catalyseur dans la mise en route du processus d’acquisition

des connaissances et, particulièrement, dans les situations

où les MNEs sont en quête de marché. Copyright © 2014

ASAC. Published by John Wiley & Sons, Ltd.

Mots-clés : motivations d’investissements, en quêtede marché,

en quête d’eff‌icacité, acquisition des connaissances, f‌iliale,

pouvoir d’absorption, MNEs

Multinational enterprises (MNEs) are increasingly

confronted with competitive, diverse, and uncertain business

environments in today’s global market. In this context,

foreign direct investment (FDI) represents an important

means for MNEs to enhance their organizational eff‌iciency

and effectiveness and develop their internationalization

strategies. From an MNE perspective, López-Duarte and

García-Canal (2002) have described FDI as tactical invest-

ments carried out in order to exploit some f‌irm-specif‌ic

assets in overseas markets and have stated that FDI often

plays a pivotal role in helping MNEs build up competitive

advantages throughout the internationalization processes.

FDI has been increasing rapidly around the world due to

the wave of FDI sweeping through Europe and North

America (developed economies) as well as Latin America

and Asia (developing and emerging economies) since the

1980s. It has also inf‌luenced a wide range of industrial

sectors such as chemical, machinery, electronics, precision

instruments and telecommunications, banking, and

many others. According to UNCTAD estimates (1999,

†

This work was supported by Hankuk University of Foreign Studies

Research Fund.

*Please address correspondence to: Byung Il Park, Hankuk University of

Foreign Studies, College of Business Administration, 270, Imun-dong,

Dongdaemun-gu, Seoul, 130-791South Korea. Email: leedspark@hufs.ac.kr

Canadian Journal of Administrative Sciences

Revue canadienne des sciences de l’administration

31: 104–115 (2014)

Published online 2 May 2014 in Wiley Online Library (wileyonlinelibrary.com) DOI: 10.1002/CJAS.1278

Can J Adm Sci

31(2), 104–115 (2014)Copyright © 2014 ASAC. Published by John Wiley & Sons, Ltd. 104