New Voices in Investment: A Survey of Investors From Emerging Countries


  • This new book draws on a survey of 713 firms to examine the behavior of emerging-market investors.
  • It looks at what makes a firm likely to invest, the geographic biases in investor decisions, how market familiarity affects investment decisions, and other factors that matter to investors.
  • The analysis leads to recommendations on trade policy, business environment, and investment promotion agencies.

The Study

One out of every three dollars invested abroad in 2013 originated in firms from emerging economies. Yet we still have a limited understanding of the factors driving the impressive rise and patterns of internationalization of emerging market multinationals. Drawing on a survey of 713 firms from emerging countries, New Voices in Investment: A Survey of Investors from Emerging Countries sheds light on the characteristics, motivations, strategies, and needs of emerging-market investors.

In contrast to previous surveys of foreign investors, the sample of the “Potential Investor Survey” includes not only investors, but also firms that considered investing and decided not to, and companies that never considered establishing a foreign presence. This novel survey design reveals differences in incentives and obstacles faced by investors, potential investors, and non-investors. This distinction matters enormously, particularly in identifying binding constraints on foreign investment among those that never managed to carry out the cross-border investment.

Main Findings 

There are significant differences among investors and noninvestors. Investors are significantly more dependent on international trade than noninvestors. Indeed, the greater the proportion of earnings that a firm derives from international trade, the more likely it will be to consider investing abroad. Moreover, firms that are publicly listed, owned by domestic capital, and are larger in terms of their labor force are more likely to invest in developing countries.

Emerging market investors exhibit a strong regional bias. While some analysts have stressed the greater geographical dispersion of the recent wave of outward FDI flows from emerging economies, we find that firms in our sample invest more heavily in neighboring countries, where they face lower informational costs and cultural barriers. This regional concentration is stronger for investment in the services sector. Yet, there is cross-country heterogeneity. Firms from India appear to be more globalized than their counterparts from Brazil, South Africa, and Korea, investing more heavily in East Asia and Europe than in the South Asian region

Outward FDI from emerging economies is primarily market and efficiency seeking. For almost 70% of investors surveyed, accessing new markets was the main motivation for investing abroad.  Another 20% of respondents invested abroad to lower production costs. Only 5% of investors were driven by the availability of natural resources. The interest of emerging market multilaterals in taking advantage of opportunities for market and business expansion in developing countries is also evident when analyzing the factors that influence their location decisions. Almost 36 percent of investors selected the size of the domestic and regional markets as the top factor influencing their choice of an investment destination.  For 30 percent of the firms surveyed, the presence of a variety of potential business counterparts was the most important location factor. A sizeable proportion of respondents (12 percent) worried primarily about the cost of labor.

Emerging markets firms confront a trade-off between market size and market familiarity. The clear regional concentration that emerges from our data suggests that firms face binding costs of investing in distant, culturally dissimilar markets, particularly those in the services sector. Our findings show that firms are more likely to invest in countries that share borders, and have a common colonial history and language.

International economic agreements facilitate cross-border investments. By contributing to regulatory clarity and stability, bilateral investment treaties partly offset the costs associated with investing in faraway and/or unfamiliar markets. Trade agreements, in turn, increase the perceived attractiveness of a host country by providing firms with opportunities to access new markets and reduce the costs of trade.

Political factors constitute binding constraints that deter some emerging-market firms from investing in developing markets. Far from being immune to political risk and cultural uncertainty in host markets, those firms that are more averse to these conditions seem to self-select out of foreign investment. Investors, in turn, value political stability and transparency more than corruption control and fair elections in the host country.

National investment promotion agencies play only a marginal role in raising awareness of investment opportunities in developing countries. Nevertheless, these agencies appear to be a widely used and useful resource for investors once they have made the decision to enter a specific market. In line with previous research, our findings show that investment promotion agency services tend to be more valuable for smaller and less productive firms, for which access to information is more costly.


Our findings suggest that developing countries can increase their attractiveness to investors from emerging and newly emerged economies through a series of policy measures, including:

  • Maintaining liberal trade and investment policies; 
  • Joining international trade and investment agreements;
  • Providing a stable and predictable political and institutional environment;
  • Improving the efficiency and effectiveness of national investment promotion agencies.