Capital Shortages as a Barrier to Investment in Frontier Markets: An Inherent Opportunity for Foreign Private Equity Investors

Abstract

The majority of capital commitments to private equity funds are sourced from developed markets, predominantly the United States. Inevitably, private equity investments made in nondeveloped markets are generally a form of a foreign investment. The dissertation later argues that it should be denoted as financial foreign direct investment (FFD), distinguishing it from traditional FDI. Examining how FFDI is another expression of FDI enables the research to explore the underlying implication on decision making strategies and locational determinants of considering a foreign market. The research finds three main differentiators, motive of investment, stakeholders and duration. Effectively, the differentiators result in different deal selection, post-investment strategies and performance measurement.