Testing the multinational contracting OLI framework: Australia as a host market

Abstract

Purpose: Over the past decade, the Australian Government has sought to attract new foreign entrants to the public infrastructure market to address limited competition in the Public–Private Partnerships (PPP) sector. Notably, multinational contracting patterns in Australia’s road, bridge, and tunnel sectors differ from trends “tend to focus and expand first in their own region and then globally” observed in prior studies of multinational enterprises. This presents a research opportunity to explain these patterns through the unique behaviour of multinational contractors (MCs) in Australia’s major infrastructure sector and to attract greater overseas interest by applying Dunning’s Ownership, Location and Internalization (OLI) framework. While this framework was previously adapted for multinational contracting, it has not yet undergone empirical testing. This study represents the first empirical application of the adopted framework, focusing on inbound Foreign Direct Investment (FDI). Design/methodology/approach: A multiple case study approach was employed to test the redeveloped OLI hypotheses, focusing on four home countries—China, Japan, Spain and the USA—and their engagement with Australia as the host country. Structured questionnaires served as the primary tool for conducting face-to-face interviews with Tier 1 home MCs. To ensure robust analysis, primary data from each case were corroborated with secondary data. Findings: The analysis outcomes validate the new multinational contracting OLI hypothesis and highlight the relative importance of OLI factors in this context. Identifying these factors will help Australian authorities adopt new strategies to attract more MCS (including from the Australian region) and enhance competition in the public interest. This further underscores a limitation of the traditional OLI framework when applied to sectors with high location specificity like multinational contracting. Practical implications: MCs seeking foreign locations for outbound Foreign Direct Investment (FDI), as well as host market governments aiming to attract new MCs to increase competition and enhance value for money in their investments, can deploy this newly developed OLI framework. Originality/value: This study addresses that gap by examining inbound FDI in construction research. This research examines key factors shaping multinationals’ perceptions of the public sector’s major roads, bridges and tunnels and how these influence their willingness to bid through the OLI framework. It also indirectly touches on construction costs, as price perceptions may affect sector attractiveness.