OFDI can enhance the availability of tangible assets and products in the home country, including capital goods, machinery and equipment, intermediary products and brands. These can, for example, be acquired overseas and transported back to the home country, where they can then be utilised in important economic activities, such as domestic production, technological development, productivity enhancements, value addition and marketing (UNESCAP 2020). The result might be lower costs, improved and more efficient production processes, greater (production) capacities, and improved distribution and sales of final goods (Knoerich 2017).
When OFDI acquires tangible assets and products that help improve domestic production, technological development, productivity and value addition in the home country, it can contribute to SDG 9.5 (“upgrade the technological capabilities of industrial sectors”) and SDG 9.B (“support domestic technology development”).
Key insights
- OFDI could lead to greater availability of tangible assets and products in the home country.
- Governments could take a neutral approach towards the adoption of HCMs in this area, given the uncertainties about the realisation of home-country effects.
Interactions
B5) Entry mode: M&As have the potential to facilitate the acquisition of tangible assets and their return to the home-country.
B8) Transmission channels: Transportation infrastructure could facilitate the direct transfers of tangible assets and products to the home country.
Available Research Findings
Knoerich (2016, Table 2): The study provides a few examples where Chinese OFDI has brought tangible assets (e.g., machines, production processes, intermediary products) back to China.