Based on the Granger causality tests, the main findings do not advocate the OFDI-led
growth hypothesis, suggesting the Malaysian multinational firms may have lower
tendency to establish linkages with domestic firms because the home inputs might not be
price competitive internationally and perhaps, they are not suited to global market
requirements. To forge linkages between domestic firms and Malaysian multinationals,
and to facilitate home sourcing for OFDI activities, the Malaysian government should
prepare the home private sector for increasing competition in the era of globalization. For
instance, to make the sector more competitive, the government can design policies to
facilitate the sector to achieve economies of scale in production, to reduce the cost of
doing business, and to enhance local business linkages with Malaysian multinationals.
Furthermore, Malaysian multinationals should be encouraged to remit their profits from
their direct investment abroad and reinvest their remittances in the home country to
stimulate economic growth. Finally, there is evidence of a unidirectional causality that
runs from home country economic growth to OFDI from Malaysia, implying higher real
GDP growth, the more developed is the economy, the higher is the level of OFDI from
Malaysia. This evidence, which conforms to the argument put forward by the investment
development path model, is imperative for Malaysian firms to internationalize their
business activities abroad so that they can integrate themselves into the global supply
chain, and this can bring potential benefit to home economic activity.