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Foreign Direct Investment (What? (flow of FDI (Outflows of FDI, Inflows of…
Foreign Direct Investment
Pattern
Knickerbocker
Multipoint competition
Eclectic paradigm
Location-specific advantages
Externalities
Theoretical Approaches
Radical view
Free market view
Pragmatic nationalism
Shifting ideology
Benefits For the Host Country
Resource transfer effects
Employment effects
Balance of payments effects
Effects on competition and economic growth
FDI Cost
For The Host Country
Adverse effects of FDI on competition within the host nation
Adverse effects on the balance of payments
Perceived loss of national sovereignty and autonomy
Source
US is the largest source
What?
in new facilities to produce and/or market
greenfield investments
flow of FDI
Outflows of FDI
Inflows of FDI
stock of FDI
multinational enterprise
FDI Benefit
The Home Country
The effect on the capital account of the home
country’s balance of payments from the
inward flow of foreign earnings
The employment effects that arise from
outward FDI
The gains from learning valuable skills from foreign markets that can subsequently be transferred back to the home country
Costs Of
FDI To The Home Country
The home-country’s balance of payments
can suffer
Employment may also be negatively affected if
the FDI is a substitute for domestic production
Patterns
Growth
a fear of protectionism
political and economic changes
new bilateral investment treaties
the globalization of the world economy
Gross fixed capital formation
Entry mode
Acquisition (mergers)
=> Firm choose more
Quicker to execute
Less risky
Increase the efficiency of an acquired unit by transfer
Greenfield Investments
Government influences on FDI
Encourage outward FDI
Restrict outward FDI
Encourage inward FDI
Restrict inward FDI
FDI means for manager
Trade theories implication about FDI
the link between government policy and FDI
The direction of FDI can be explained through the location-specific advantages argument
important in decisions about where to locate and where to make an investment
Why choose FDI
Exporting
Licensing