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Abstract Over the past two decades, there has been a decisive shift in trade and industry policy in developing countries (DCs) away from import substitution and towards export‐orientation. As part of this policy shift, an increasing number of DCs have become more receptive to foreign direct investment (FDI). Despite its policy relevance, the literature on the role of FDI in the export expansion of manufactured exports from DCs is sparse. This article attempts to fill this gap through a case study of the role of export‐oriented FDI in Malaysia's rapid industrialisation. The overall conclusion of the article is that export‐oriented FDI has brought significant returns to Malaysia principally because the general economic climate has been favourable for the internationalisation of production for a considerable period of time.
Athukorala et al. (Sun,) studied this question.