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4 Cards in this Set
- Front
- Back
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What is foreign direct investment? |
• Foreign direct investment (FDI): a firm invests directly in new facilities to produce or market in a foreign country • A firm engaged in FDI is a multinational enterprise • Two forms of FDI: 1. A greenfield investment - the establishment of a wholly new operation in a foreign country 2. A brownfield investment - acquisition or merging with an existing firm in the foreign country |
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What are the benefits and costs of FDI? |
Home benefits - Balance-of-Payments Effects - Effect on Competition and Economic Growth Home costs 1. Adverse Effects on Competition 2. Adverse Effects on the Balance of Payments Host benefits 1. Resource Transfer Effects2. Employment 3. Balance-of-Payments Effects4. Effect on Competition and Economic Growth. Host costs 1. The balance-of-payments 2. Employment effects of outward FDI
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What does FDI mean for international businesses? |
•The theory of FDI has implications for strategic behavior of firms •Government policy on FDI can also be important for international businesses |
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Firms that expand internationally can increase their profitability and profit growth by: |
1. Entering markets where competitors lack similar competencies 2. Realizing location economies 3. Exploiting experience curve effects 4. Transferring valuable skills within the organization |
