Global leader in foreign direct investments essay

Essay on foreign direct investment

Firstly, this form of FD target can be put in place through the process of agglomeration. Operational efficiency that is being sought by an FDI firm can also be easily attained due to the prevalence of technology gap especially in developing economies. However, there are quite a number of considerations worth noting when discussing exchange rate level and its effect on foreign investment. VanPottelsberghe, d. Transportation costs and international trade in the second era of globalization, The Journal of Economic Perspectives, 21 24 : — Bevan, A. Firstly, the prevailing economic and political factor that may affect the process of exporting goods and services from the host country especially in the case of indirect marketing is important. Trade effects Foreign firms often have the opportunity of enjoying numerous trade benefits when operating under FDI. Moreover, the institutional framework in place is also yet another boosting factor that sees into it that efficiency is attained by foreign firms engaging in FDI. Foreign direct investment PAGE 3. In course of their operations, there will be transfer of technological know-how from the firm to the host country and consequently improve capital investment through the both the vertical and horizontal development. There has been a considerable rise of FDI opportunities recently within Ethiopia.

Although these are pertinent questions worth inquiring, the multinationals seeking Direct Foreign Investment often do not consider these queries beforehand since it is by far and large the concern of the host country. Journal of International Economics, — Secondly, concerns have also been raised over the possible costs that the domestic firms undergo when foreign multinationals secure their place in the local market BenassyQuere et al.

Foreign direct investment pdf 2017

Foreign direct investment PAGE 3. Besides, nations are also formulating sound and friendly company policies and code of ethics that enhance international trade and capital flow. In spite of the aforementioned motives why companies will opt for FDI, it is vital to note that internalization of a business enterprise has its own share of challenges and positive attributes. These institutions can be divided into two main categories. Grossman, G. Learn More In the first scenario, the host country is used as the ground for exploiting the available market. In spite of this, local conditions often streamline their operations even as they seek to improve efficient abroad. References Anderson, J. Worse still, ethnocentric staffing of Multinationals has also eroded the native culture since these firms are mainly managed by individuals from country while the subordinate positions are held by the local staff.

Review of Economics and Statistics, 83 3 : — Transnational Corporations, 11 2 : 1— Mne competence creating subsidiaries mandates, Strategic Management Journal, 12, pp.

As consequence, a firm has to relocate some of its operations overseas in order to reap the optimum benefit of the asset whose value cannot be transferred from one location to another without losing its value. With such, it implies that matters related to foreign exchange can significantly impact any FDI arrangement in place, bearing in mind the unstable nature of currency exchange rates across the globe.

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Technology sourcing and strategic foreign direct investment, Review of International Economics, 14 4pp. In such as case, proximity to other companies is a crucial consideration to make before setting up the project.

What are the 3 types of foreign direct investment

Transnational Corporations, 11 2 : 1— A case study of some developing countries reveals that political upheavals such as coup de tats have scared away investors a great deal. Exchange rate is the relative value of the domestic currency compared to the price of the foreign currency. Review of Economics and Statistics, 83 3 : — Indeed, the prevalence of peace and stability through thorough enforcement of legislation is a driving force Multinationals to invest in some developing and developed countries. That is the only way through which the asset can be accessed. It is against this backdrop that forms will opt to invest in both developed and developing countries that are experiencing continual fluctuations in currency exchange rates. Hence, each firm will endeavour to produce the best in a bid to capture and maintain market leadership. Linking FDI motivation and host economy productivity effects: conceptual and empirical analysis. There are quite a number of literature and empirical studies that have vividly documented the efficiency benefits at the disposal of foreign multinationals in addition to the degree of spillovers in target countries. Transportation costs and international trade in the second era of globalization, The Journal of Economic Perspectives, 21 24 : — Optimal integration strategies for the multinational firm. The domestic market is often saturated with both substitute and complimentary products from rival firms. However, there are pertinent investment factors that can be put in place in order to boost their returns.

By reaching out other developing and developed countries, the market portfolio is definitely doubled.

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The Foreign Direct Investment Confidence Index®