Understanding the Relationship between Foreign Direct Investment and Competitiveness through Porter's Models

Abstract

Today, when it is a luxury not to be involved in globalisation and information integration processes, countries and companies are trying to operate in an extremely competitive environment. In this environment, while states attach importance to national competitive advantage, companies prefer foreign direct investments to ensure their corporate sustainability in internationalisation processes. As mentioned in Porter's models, the motivations of foreign direct investments can be differentiated in multiple layers. Various variables play a major role in this differentiation. The difference is due to the competitiveness that has been in mankind since the existence of mankind. It is stated that competitiveness is not only an economic but also a social and environmental indicator. In the study, after a detailed literature review, the relationship between FDI and competitiveness was analysed in the light of Porter's five-tier models, namely the diamond model at the national level, the 5 forces model at the sector level, the 4 corners model (main competitor analysis) at the sector level, the value chain at the company level, and generic strategies at the product service level. For the empirical verification of the study, 61 countries from 6 continents were identified based on secondary data and the relationship between outward FDI and competitiveness was investigated. The results of the statistical analyses subject to the conceptual model are discussed and the contributions of the study are mentioned. Finally, the limitations of the study and the subject of further research are stated.