ARTICLE CRITIQUE ON EXPORTS AND OUTWARD FDI: ARE THEY

COMPLEMENTS OR SUBSTITUTES? EVIDENCE FROM ASIA AND SURVIVAL

OF OUTWARD FDI IN CHINA’S FOOD INDUSTRY

1. INTRODUCTION

This article critique will covers outward foreign direct investment (OFDI) in two

different perspectives by using two valuable journals. The first journal is titled ‘Exports

and Outward FDI: are they complements or substitutes? Evidence from Asia’ written by

Niti Bhasin and Justin Paul in 2016. The second journal titled ‘Survival of outward FDI IN

China’s food industry’ written by Ciao et. al (2016). This article critique will compare the

content of both of the journals relating to OFDI, deliver comments of the writers writing

styles and give the overall point of view of OFDI based on these journals.

2. SUMMARY

The first article discussed about the relationship between outward foreign direct

investment (OFDI) and exports of home country in terms of their importance in

internationalization as well as their implications for both policymakers and multinational

enterprises (MNEs). According to the Bhasin and Justin (2016), the purpose of this article

is to investigate this relationship in ten major emerging countries from Asia by using

panel data from 1991 to 2012.

The result from the investigation indicates that there is a long causality from exports

to OFDI and they are also found to be substitutes. Moreover, the MNEs are not in relation

with home country firms through both backward and forward linkages in the production

process. This indicates that there is no long run causality from OFDI to exports of home

country.

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 The second articles that also discussed about OFDI but focus on the survival of FDI

in China’s food industry. According to Ciao et al. (2016), the purpose of this article is to

examine the stability of OFDI from Taiwan and Japan in China’s food industry. This

article also explores the Cox proportional hazard model in order to investigate whether

the factors can affect the duration and stability of FDI. The writers conducted a survey in

different China’s provinces in 2003 to 2012 and did a survival analysis of FDI in China’s

industry by using the survey data.

The writers found that the Taiwanese’s FDI has higher survival rates compare to

Japanese’s FDI. They also discovered a positive relationship between research and

development (R&D) expenditure as well as domestic investment and the hazard rate.

This indicates that Japanese investment would decrease the survival of FDI in China

because of the Japanese investment have greater R&D expenditure and domestic

investment. This is different with Taiwanese’s investment which the writers found that

their investments with greater R&D expenditure as well as domestic investment can

increase the survival of FDI in China.

3. CRITIQUE

In my opinion, both of the articles use the same writing style and it is easy to

understand the writers explanation. In the first article, the writers have clearly explained

about how important of OFDI in recent times especially for developing countries. The

writers managed to catch the reader attention on the significance of studying the

relationship between OFDI and exports as FDI inflows and outflows are considered to be

important engines of growth for these countries.

The same goes to the second article where the writer explained clearly on the

condition of FDI in China and the important to know about FDI survival in the country.

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 Both of the articles stated the background information and previous research in their

article to strengthen some of the statements. They explained briefly what each section in

the article will be discussed about.

In research and methodology section, both of the articles clearly outlined the

source of the data and sample; procedures and type of tests that they used. The reader

can identified all the variables from different tests that the writers have stated clearly with

the help of set of equations. Both of the articles managed to deliver the results clearly

supported by tables and statistical information. At the end the articles, both of the articles

summarized all the findings supported by their own reasonable comments. The findings

also support the research’s hypotheses.

4. COMMENT

The writers of both of these articles claimed that these two articles is the first

paper to discuss the respective topics. The first article is the first paper that deals with

relationship of OFDI and exports of the home country. Meanwhile, the second article

is the first paper that used survival comparisons of relevant FDI studies of the food

industry across countries. Both of these articles will give valuable information and

ideas to for organizations that plan to pursue FDI in developing countries.

FDI is rapidly becoming an important factor in the economic growth of

organization and countries. The most preferred FDI by MNEs is acquisition which is

when international investment acquires an established local company and makes the

acquired local company a subsidiary business within its portfolio. Acquisition is much

faster to execute, has pre-empt competitors and less risky.

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 Some of the advantages of using FDI are ownership, location and

internationalization advantages. The low cost that the foreign can offer an MNE such

as cheap labor, cheap land can allows the MNE to compete successfully in the global

market. It is also cheaper for the MNE to exploit its ownership and location

advantages to reduce cost by using FDI. However, in comparison with exporting and

licensing, FDI is way too expensive as a MNE have to spend high costs for the

operations at a foreign land compare to export activities. FDI also can be risky due to

political instability and restriction of trade developing in the foreign countries.

FDI can give pros and cons for both host country and home country. Ciao et.

al (2016) has proved that Japanese investment would decrease the survival of FDI in

China while Taiwanese’s investment can increase the survival of FDI in China. It is

wise for an organization to conduct a strategic planning to determine the variables

factors that may influence the success of implementing FDI.

REFERENCE

Ciao-Ru Jian, Daisuke Takahashi, Tsai-Yu Chang, Chung-Hsuan Wei, (2016) "Survival of
outward FDI in China’s food industry", British Food Journal, Vol. 118 Issue: 5,
pp.1237-1253, https:// doi.org/10.1108/BFJ-11-2015-0443

Niti Bhasin, Justin Paul, (2016) "Exports and outward FDI: are they complements or
substitutes? Evidence from Asia", Multinational Business Review, Vol. 24 Issue:
1, pp.62-78, https:// doi.org/10.1108/MBR-05-2015-0016