国际商务环境 International Business Environment FDI Ch.7.ppt

Foreign Direct InvestmentForeign Direct InvestmentForeign Direct InvestmentØWhy is FDI increasing in the world economy?ØWhy do firms often prefer FDI to other market entry strategies?ØWhy do firms imitate competitors with FDI strategies?ØWhy are certain locations favored for FDI?ØHow does political ideology affect government FDI policy? ØWhat are key FDI related costs and benefits for receiving and source countries?Foreign Direct InvestmentØForeign direct investment (FDI): a firm invests directly in foreign facilities ØA firm that engages in FDI becomes a multinational enterprise (MNE)–Multinational = “more than one country”ØFactors which influence FDI are related to factors that stimulate tradeForeign Direct InvestmentØInvolves ownership of entity abroad for–production–Marketing/service–R MNEs –Are imperialist dominators –Exploit host to the advantage of home country –Extract profits from host country; give nothing back –Keep LDCs backward and dependent for investment, technology and jobsØThe free market view: FDI should be encouraged –Adam Smith, Ricardo, et al: international production should be distributed per national comparative advantage –An MNE increases the world economy efficiencylBrings to bear unique ownership advantages lAdds to local economy’s comparative advantagesHost Country Effects of FDIØBenefits –Resource -transfer –Employment –Balance-of-payment (BOP)lImport substitutionlSource of export increaseØCosts –Adverse effects on the BOPlCapital inflow followed by capital outflow + profitslProduction input importation –Threat to national sovereignty and autonomylLoss of economic independence Government Policy and FDIØHome country–Outward FDI encouragementlRisk reduction policies (financing, insurance, tax incentives)–Outward FDI restrictionslNational security, BOPØHost country–Inward FDI encouragementlInvestment incentiveslJob creation incentives–Inward FDI restrictionslOwnership extent restrictions (national security; local nationals can safeguard host country’s interestsDecision Framework for FDIExportFDIFDIFDILicenseYesImport Barriers?NoNoYesNoAre transportation costs high?Is know-how easy to license?Tight control over foreign ops required?Is know-how valuable and is protection possible?NoYe sYe sNoYe s。