Authors: Nirwan Noh, Tham Siew Yean
This study explores the determinants of foreign direct investment (FDI) in the services sector in Malaysia. More specifically, it examines key factors that drive service investors to invest in a foreign country. Six firm-level qualitative case studies provide an overview of how foreign investors utilise their ownership, location and internalization advantages to invest across borders. Data was collected through semi-structured interviews and content analysis of various documents related to six service-oriented foreign companies. We find that human capital, technology, branding, service quality, liberal regulations, global experience and network, are the main factors influencing the investment decisions of these firms. The findings support Dunning’s OLI Paradigm, showing that investors in the services sector are also resource-, market- and efficiency-seeking firms, similar to those in the manufacturing sector. The paper concludes by discussing the main contributions of the key findings of this study to the FDI literature and its policy implications.
Keywords: Services Sector, Foreign Direct Investment, Qualitative Method, Case Study, Malaysia