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10 Cards in this Set
- Front
- Back
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Foreign direct investment (FDI)
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occurs when a firm invests directly in new facilities to produce and/or market in a foreign country.
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2 main forms of FDI
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1) A greenfield investment (the establishment of a wholly new operation in a foreign country)
2) Acquisition or merging with an existing firm in the foreign country |
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The flow of FDI refers to
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the amount of FDI undertaken over a given time period
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The stock of FDI refers to
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the total accumulated value of foreign-owned assets at a given time
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Inflows and Outflows of FDI are
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the flows of FDI in and out of a country
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Gross fixed capital formation
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summarizes the total amount of capital invested in factories, stores, office buildings, and the like
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exporting
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producing goods at home and then shipping them to the receiving country for sale
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licensing
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granting a foreign entity the right to produce and sell the firm’s product in return for a royalty fee on every unit that the foreign entity sells
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Internalization Theory
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Suggests that licensing has three major drawbacks as a strategy for exploiting foreign market opportunities:
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3 drawbacks to licensing (Internalization Theory)
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1) giving away valuable technological know-how
2) does not give a firm the tight control over manufacturing, marketing, and strategy 3) when the firm’s competitive advantage is based not so much on its products as on the management, marketing, and manufacturing capabilities that produce those products |
