Foreign Direct Investments as a Prospective Strategy of Business Integration in the Digital Economy

Abstract

Purpose

In this work, we study the investment processes in the digital economy, which includes determining the specifics of foreign direct investments (FDIs) under the conditions of digital technologies' development and substantiating the key directions and tendencies of investing from the positions of strategies of business integration and digital technologies' development.

Design/Methodology/Approach

This research is based on the multidisciplinary approach, which covers strategic management, investing, the theory of digital economy etc. The chapter combines the theoretical developments of these disciplines and presents them in the context of substantiation of the processes of using foreign direct investments as the tools of the business integration strategy. The proposed methodology allows generalising the view of the studied processes from the position of the digital economy, determining its structure; describing the key directions of development and investing; establishing the specifics of the use of FDI by transnational corporations; substantiating important directions for further processes.

Findings

It is revealed that foreign direct investments are not only the important factors in economic systems' development but also the effective tools for the integration of international business through the common use of the potential of parent and subsidiary companies for the reduction of transaction costs, an increase of profit etc. It is substantiated that the character of direct investing in the digital economy is different from the similar processes in the industrial system due to the non-material character of assets and their connection to the Internet. Based on this, implementing the investment strategy in the digital economy, transnational corporations offer access to technologies, ensure technological modernisation and facilitate the achievement of other indirect effects, which are less aimed at the increase in material assets. These processes lead to a change in the balance of revenues compared to the cost of material assets that are invested in the receiving market or subsidiary company. The indicator of such a ratio is the indicator ‘FDI lightness’. A high value of this indicator is a sign of the large perspectives of a company in the sphere of international activities.

Originality/Value

The specifics of FDI in the digital economy are determined, the key directions of such activities are described, and the peculiarities and differences of investing in the digital economy are shown.

Citation

Karanina, E.V., Lazareva, N.V., Perevozchikova, S.M. and Smetanina, A.I. (2023), "Foreign Direct Investments as a Prospective Strategy of Business Integration in the Digital Economy", Popkova, E.G. (Ed.) Game Strategies for Business Integration in the Digital Economy (Advances in Business Marketing and Purchasing, Vol. 27), Emerald Publishing Limited, Leeds, pp. 267-276. https://doi.org/10.1108/S1069-096420230000027026