The BRICS countries as potential destinations for multinational manufacturing enterprises (MMEs)

Abstract

A shift in economic power from the developed world to emerging markets has seen the BRICS countries becoming the new growth centre of the world. In 2010, half of the total global foreign direct investment (FDI) flows went to emerging economies. A large portion of these FDI flows goes to the manufacturing industry with a quarter of the global GDP being generated by the production processes of multinational manufacturing enterprises (MMEs). The challenge for the BRICS countries will be to sustain their trend in FDI inflow. Previous studies on this topic focused on the determinants of FDI at country level as opposed to an industry specific focus. The outcome of this study assists MMEs in their entering decisions and policy makers in developing policies that create an enabling environment that will attract foreign capital.This research analyses the BRICS countries as potential destinations for FDI in the manufacturing industry. The analyses followed a three phased approach. The first phase identified the potential determinants of FDI to the manufacturing industry of the BRICS countries. The second phase either validated or disproved investor perceptions about the factors that would impact on the performance of an investment. In the third and final phase of the analysis, the competitiveness of the BRICS countries in attracting FDI to the manufacturing industry was assessed.The analysis of the three hypotheses contributed to the overarching theme of evaluating the BRICS countries as potential destinations for MMEs. The outcome of the analysis highlights that countries are unique and that investor perceptions about a country’s conditions and how this will impact on the performance of an investment are not always valid. In the overall analysis of the BRICS countries as potential destinations for FDI, the majority of the BRICS countries, with the exception of South Africa, are found to be competitive destinations for attracting FDI to the manufacturing industry. On the basis of the outcome of the analysis and the methodology followed in this study, a general model that can be used in future FDI research is suggested.