This paper makes a contribution to the theory of the multinational enterprise (MNE) and, in particular, to why firms undertake foreign direct investment (FDI) rather than alternative strategies. We first argue that it is vital to distinguish between asset-exploiting FDI and assetaugmenting FDI, as the alternative strategies available to the firm differ in each case and hence the rationales for FDI must also differ. Furthermore, given the predominance of controlling shareholders (family, State, institutional) in many firms worldwide, we stress that MNE theory should embrace consideration of the different objectives, risk attitudes and decision-making time horizons of important stakeholders
