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DETERMINANTS OF FDI (FDI IN THE WORLD ECONOMY (FDI activities: M&A, JV…
DETERMINANTS OF FDI
FDI IN THE WORLD ECONOMY
FDI activities: M&A, JV, Greenfield, Subsidiary
Direction of FDI flows
FDI data by country and sector
INTERNAL FIRM-SPECIFIC
Presence of
intangible assets
specific to the firm
Potential of market failure
: standard hypothesis is that it is difficult to fully appropriate rents from intangible assets through an arrangement with an external party
EXOGENOUS MACROECONOMIC
Exchange rates, taxes, institution, trade protection (tariffs, subsidies), trade flows (trade balance, trade and capital flows)
HOST COUNTRY
Economic condition
Market
Market size and per capita income, market growth, access to regional and global markets, country-specific consumer preferences, structure of markets
Resource/ assets
Raw materials, low-cost unskilled labour, skilled labour, technological and innovative assets such as brand name, physical infrastructure (ports, roads, power, telecommunications)
Efficiency
Cost of resources and assets adjusted for labour productivity, other input costs such as transport, communication and intermediate products, membership of a regional integration agreement conducive to the establishment of regional corporate networks
Policies
Macro
Management of crucial macro variables, ease of remittance, foreign exchange systems, taxes
Private sector
Promotion of private ownership, clear stable policies, host country entry/exit policies, efficient financial markets, other support
Trade and industry
Trade strategy, regional integration and access to markets, ownership controls, competition policies, support for SMES
FDI
Ease of entry, ownership, incentives, access to inputs, transparent and stable policies