Outward foreign direct investments and home-country’s exports
Outward foreign direct investments and home-country’s exports

Summary/Abstract: The article reviews the theoretical evolution and empirical evidence on the relationship between outward foreign direct investments and home-country’s exports. Classical substitution models present FDI from the perspective of capital mobility that diminishes trade, but the rise of multinational enterprises and fragmentation of global value chains challenge this view. Contemporary framework including New Trade Theory, the OLI paradigm, internalization and transaction-cost approaches and knowledge-based models such as the Knowledge-Capital framework shift attention to firm heterogeneity, intangible assets and the integration of trade with investments. The surveyed evidence reveals heterogeneous outcomes: complementarity is more prevalent in advanced economies, manufacturing sectors and vertical OFDI configurations, whereas substitution appears more often in emerging economies and horizontal market-seeking OFDI. The paper concludes that the OFDI – exports relationships are context-dependent and dynamic. Policy should encourage forms of OFDI that reinforce export capabilities via technology transfer, learning and deeper participation in global value chains.

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