The impact of indigenization policy requirements on investment

Abstract

Foreign direct investment (FDI) is constrained by various regulations Ð among these are indigenization laws which introduce risk and complexity to Multinational Corporations (MNCs). Researchers have assumed these regulations dampen investor confidence. This research aims first to establish if such a relationship exists, second, to establish specifically how these laws have influenced investment in South Africa, and lastly if investors utilized Real Options behavior to mitigate such risks. The first research question showed a relationship between levels of indigenization, FDI and MNC activity. The second research question also showed that equity restrictions in B-BBEE did limit investment in South Africa. And lastly, Question 3 indicated that knowingly or unknowingly, some Real Options behavior was observed in South African MNCs, during the period under investigation.