FDI in the KSA: institutional determinants of British multinational enterprises’ location decisions

Alshareef, Nasser Mohammad (2018) FDI in the KSA: institutional determinants of British multinational enterprises’ location decisions. Doctoral thesis (PhD), Manchester Metropolitan University.

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Abstract

This study investigates the determinants of British Foreign Direct Investment (FDI) institutional avoidance, adaptation, and co-evolution factors leading to determinations to enter in the Kingdom of Saudi Arabia (KSA) for investment purposes. More specifically, by British Multinational Enterprises (MNEs). For the purposes of stability and sustainable growth in the KSA, FDI is required in both imports and exports to promote a variety of industries. This research seeks to identify what institutional factors are being adapted and valued by British MNEs currently operating in the KSA. There is a need to understand the various factors that encourage FDI inflows into nations, and why different countries are often successful when compared to others, when attracting this important investment tool. The study provides answers to the questions regarding which factors positively and/or negatively affect the decision of British MNEs to locate in the KSA. The research demonstrates that many key factors considered as being important in other countries have also played a significant role in the decisions made by British MNEs in the KSA. The study asked firms about the obstacles they found when entering the KSA for the purposes of FDI. The results of the research indicated that most of the institutional determinants are largely analogous for all host countries, yet further research is required to ascertain if religious and cultural differences have more of an impact in the KSA due to its strong, deep rooted cultural and religious beliefs. This study is among one of a few focusing on institutional determinants of British MNEs location decisions in the KSA. Despite the numerous advantages of FDI in different countries such as Singapore, China, and Malaysia, little research has been done on FDI in the KSA (Roberts and Almahmood, 2009). Hence, it is hoped that this study will provide a useful contribution to existing research by filling this current dearth. In the KSA, some factors have been identified that lead to a low inflow of FDI. They include; Business regulatory consistency in dealing with the government; Bureaucracy; Cronyism (Wasta) and Enforcement by the legal and judicial system. The major contribution of this research is to have a clear understanding of the effects of institutions on the FDI policy and in doing so, help to fill the existing lack of literature in this area. Furthermore, the recommendations from this study may be considered as a referential basis for concept development and institutional reforms which can be used by governmental agencies promoting FDI such as the UKTI, the SCIT and the SAGIA.