Transnational Corporations - Volume 21, Issue 1, 2012

Few scholars have contributed more to our understanding of the locational factors that influence the choices made by TNCs than John Dunning. According to him, the astonishing growth of the Chinese economy and the opening up of India to the demands of the global market place “are reconfiguring the spatial landscape of economic activity”. The present study examines the importance of country- level factors on the investment location choice of Chinese and Indian transnational corporations (TNCs). Instead of using macro-economic FDI flows or stocks -- as most other studies have done -- this study will analyse greenfield investment data of Chinese and Indian firms across the globe. While most former studies have used FDI data to measure the aggregate value-adding activity of transnational affiliates in host countries, recent research has shown that the use of FDI data is a biased measure of such investment activity. This research attempts to overcome those shortcomings by analysing FDI at the firm level.

Over his long and productive life, John Dunning wrote a great deal. One of the primary concerns of his work was development. His work with the United Nations Conference on Trade and Development (UNCTAD) over the years from 1972 and the establishment of the United Nations “Eminent Persons Group” (Sagafi-Nejad and Dunning, 2008; Buckley, 2010) to his death in 2009 focused particularly on the role of transnational corporations (TNCs) in the development process.

Recognizing the potential of foreign direct investment (FDI) for development, the development community has sought measures to support developing countries to attract FDI and to maximize its benefits. In this context, the United Nations Conference on Trade and Development (UNCTAD) has developed its Investment Policy Review (IPR) programme to provide developing countries with recommendations for improving their business environment in order to better derive development gains from FDI. As a body of work, the IPR series has discerned common obstacles to FDI attraction among many developing countries. These include a lack of clear rules; ineffective policy implementation or follow-through; and FDI policies which do not reflect country-specific conditions, such as the level of development, the availability of infrastructure, skills and resource endowments. Drawing on a recently published report by UNCTAD, Investment Policy Reviews: Shaping Investment Policies around the World, this paper summarizes the lessons learnt from the programme and highlights issues and challenges for policy and corporate strategy on cross-border investment.

Global foreign direct investment (FDI) flows exceeded the pre-crisis average in 2011, reaching $1.5 trillion despite turmoil in the global economy. However, they still remained some 23 per cent below their 2007 peak.