Welfare-seeking: FDI’s unacknowledged motive

Abstract

A case is made for the inclusion, or reinstatement, of corporate rent-seeking as a one of foreign direct investment’s standard motives. Evidence suggests rent-seeking plays a dominant motivating role in the international relocation of industrial activities. A review of the extant literature suggests the neglect of rent-seeking in the FDI motivation literature may have more to do with preconceptions about multinational enterprises than the available data, then reviews extant research on rent-seeking. Consideration is given to why it was expedient to side-step rent-seeking when explaining the behaviour of multinational enterprises. It is demonstrated that recognition of rent-seeking provides researchers with a more comprehensive account of FDI causation. With a more precise differentiation between different kinds of FDI, policymakers will be better able to respond both to inward and outward FDI flows.