Does foreign direct investment theory explain subsidiary performance? : a critical literature review

Abstract

Theoretical models explaining foreign direct investment (FDI) have sought to address the "why" and "how" of the international expansion of firms. However, while it has been argued that performance is central to international business research, this is not entirely reflected by extant theory. This paper aims to critically analyse references that FDI theories make in regards to foreign subsidiary performance. An analytical framework is proposed and subsequently applied to evaluate extant empirical findings. Discussion points to the highly fragmentary character of FDI theories and the heterogeneity of empirical results, as well as an inadequate inclusion of FDI motives. The paper ends up with several recommendations for future empirical studies. (original abstract)