Working Paper No. 554

On the Treatment of Finance-Specific Factors within the OLI Paradigm

Published: April 25, 2001Pages: 30Keywords: FDI; Cost of Capital; Financial Strategies; OLIJEL-codes: F21; F23; G34; M21

On the Treatment of Finance-Specific Factors within the OLI Paradigm Lars Oxelheim, Trond Randøy and Arthur Stonehill

This article argues that the body of foreign direct investment (FDI) literature in general and the ownership, location, and internalization (OLI) paradigm in particular would be enriched if finance-specific factors are explicitly incorporated as drivers of FDI. We suggest that financial strategies involving factors such as debt/equity swaps or equity-listings in foreign equity markets affect the firm’s relative cost and availability of capital, and motivate a firm’s engagement in FDI. Large, research-intensive firms, predominantly resident in the US, UK, Japan or other liquid markets, have in the literature been identified as typical prototypes of MNEs undertaking FDI. These firms are assumed to have no restrictions as regards their ability to achieve a competitive cost and availability of capital, a focus that has made financial capabilities and resources less of an issue in FDI research. Our article mitigates this by emphasizing the relevance of finance-specific proactive strategies for FDI to occur. We generate eight testable hypotheses based on the recognition of finance-specific factors as active drivers of value creating FDI.

Lars Oxelheim


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Sick of Inequality?

An Introduction to the Relationship between Inequality and Health

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In this book Andreas Bergh, Therese Nilsson, IFN and Lund University, and Daniel Waldenström, IFN and Paris School of Economics, France, review the latest research on the relationship between inequality and health. What does inequality mean for our health? Does increasing income inequality affect outcomes such as obesity, life expectancy and subjective well-being?


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