Towards a theoretically-based global foreign direct investment policy regime

This paper seeks to derive rational policies towards multinational enterprises (MNEs) from extant international business theory. It examines the impact of national institutions and policies on both inward and outward direct foreign investment. It adopts a theory-based perspective utilising internalisation, transaction cost and institutional approaches to the operations of MNEs. It contrasts the received policy process by which MNEs react to policy initiatives with a potential “direct” policy model whereby strategic decisions of MNEs embody policy goals. The paper suggests that transparent national policies with robust supranational monitoring are the best solution for world economic welfare.