Horizontal, Vertical And Conglomerate OFDI: Evidence From Thailand

Abstract

Thailand is a late comer in international expansion but the pace of overseas investment has accelerated in recent years. This paper is the first attempt in exploring the distribution of Thai outward foreign direct investment (OFDI) by types of their investment strategy. Using a unique firm-level FX transaction data, we find that the majority of Thai OFDI is horizontal in nature with vertical and conglomerate investment sharing less than half of the overall total. Horizontal investment is driven mainly by the desire to gain market share and vertical investment by relative factor endowments.  Although largely ignored by previous empirical studies, a considerable proportion of Thai OFDI involves conglomerate investment strategy which is driven mainly by financial motives. We also find that Thai companies have simultaneously entered into developed and developing countries, with all types of investment going mostly to developed countries.