De-industrialisation, comparative economic performance and FDI inflows in emerging economies

•De-industrialisation/relative economic performance and FDI.•Use of variables that account for ‘opportunity cost’ of FDI.•De-industrialisation of developed economies increases FDI into emerging.•Relative under-performance of developed economies reduces FDI into emerging.•De-coupling fosters FDI into emerging economies.

We address calls to incorporate comparative political economy considerations into IB scholarship. In particular, we conceptualise and test empirically the hitherto unexplored relationship between de-industrialisation and relative performance of groups of countries, and FDI inflows in emerging economies. Using a panel dataset over the period 1996–2004 and employing conceptual and methodological innovations (not least the use of comparative independent variables), we find support for the ideas that relative de-industrialisation of developed economies will increase FDI inflows into emerging economies, while the relative under-performance of developed countries will reduce it. We also find that divergence in business cycles-de-coupling between the two groups of countries fosters FDI inflows in emerging economies. These help explain and predict recent changes in the global business landscape and inform public policy and managerial practice.