FDIs became the main tool for investment across the world. They represent an important share of the global production. The historical experience of economic development and catch-up taught us that developing countries are able to achieve sustainable and progress economic growth. However this requires a multitude of conditions. The investigations showed that FDIs, regardless of the type, were essential of this path
The main purpose of this research is to investigate the case of Outward Foreign Direct Investments (OFDIs) in Newly Developed Countries for Small and Medium Enterprises, taking specifically the case of Lebanese SME’s.
The research relies on an extensive literature review as a source of secondary data and a qualitative methodology for collecting primary data on OFDI in Lebanon, in terms of its drivers, characteristics and challenges.
The main findings of the study show that SMEs in Lebanon perform OFDI for two main reasons: the first is a direct result of the small market size and saturation of the local market, which renders OFDI as a natural step for expansion and growth of successful Lebanese SMEs, and the second is using OFDI as a coping strategy to overcome institutional difficulties in the local market the hinder the growth of SME’s. The main institutional barriers are related to the access to finance through the local commercial banking sector, and the level of corruption and bureaucracy in the public sector. In addition, the overall political and economic instability in the country and the region is encouraging SME’s to diversify their activities in more stable environments.
The research provides a series of managerial recommendations for SME’s in developing countries planning to perform OFDI. It also sheds light on policy implications of OFDI and what local governments can do in order to attract more local investment. Originality/ value
The main value added of this research is that is tackles a topic that has not been researched in Lebanon. The issue related to OFDI performed by Lebanese SME’s have not been studied in the literature and therefore, this study sheds light on these firms and recommends steps that the government needs to take to attract these SMEs to remain in the country and invest locally.
Outward Foreign Direct Investment, Lebanon, Small and Medium Enterprises, OLI paradigm, institutional distance.