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Introduction of foreign direct investment
Economic analysis of foreign direct investment
Advantages of FDI to host country
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Recommended: Introduction of foreign direct investment
Foreign direct investment (FDI), which can be defined as a foreign company purchasing a company or starting a business (in production or services via full ownership or alliances) in another country and exercising its proprietary and operational rights over the business. De Mello Jr. (1997) summates FDI as being an amalgamation of technology, capitol stocks and the skill of knowing how to get things done. Inward FDI describes the flow of the investment to the recipient or host country. In essence, the host country receives the new business entity and all that it brings with it; both its positive and negative impact. Research such as that of Bengoa and Sanchez-Robles (2007) has linked FDI to positive economic growth in host countries. This essay will analyse and evaluate the argument and methodology of the authors Haskel, Pereira, and Slaughter (2007).
Literature Review/Theoretical Foundations
The work of Haskel, Pereira, and Slaughter (2007) was reviewed. This work set out to examine some questions. They wanted to know if productivity spillovers from FDI to local companies existed in the industry and in the region and in order to draw FDI what amount should a country be prepared to pay and offer in incentives. The research seemed to gloss over the second question but strongly focused on the first. After the first two pages or so it focused on the question of productivity. There was no conclusive answer at the end to what level of expenditure should be put forward to attract FDI. It was inferred though that the incentives paid by England are excessive in comparison to what it gets back. The title of the article was a little misleading in that it gave a narrower impression of what the research entailed. A better title perhaps ...
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...99), ‘Foreign direct investment in developing countries and growth: A selective survey’, Journal of Development Studies, 34(1), pp. 1 -34, Taylor and Francis [Online]. Available at: http://www.tandfonline.com.ezproxy.liv.ac.uk/doi/abs/10.1080/00220389708422501 (Accessed: 20 July 2011).
Gorg, H. and Greenaway, D., (2004) ‘Much ado about nothing? Do domestic firms really benefit from foreign direct investment?’, World Bank Research Observer, 19 (2), pp. 171- 197, [Online]. Available at: http://wbro.oxfordjournals.org/content/19/2/171.short (Accessed: 20 July 2011).
Haskel, J. E., Pereira, S.C., Slaughter, M. J. (2007) ‘Does inward foreign direct investment boost the productivity of domestic firms?’, Review of Economics and Statistics, 89(3), pp.482-496, [Online]. Available at: http://dx.doi.org.ezproxy.liv.ac.uk/doi:10.1162/rest.89.3.482 (Accessed: 18 July 2011).
Sweeney, M. (2010). Foreign direct investment in India and China: The creation of a balanced regime in a globalized economy. Cornell International Law Journal, 43, 207-248. Retrieved from http://www.lawschool.cornell.edu/research/ilj/upload/sweeney.pdf
Off-shoring is the establishment of business operations outside national boundaries. The process of moving business outside these boundaries is to garner an advantage either through tax breaks, lower wages, lower transportation cost and/or relaxed regulations ("Offshore definition," 2014). Many firms either branch out as a horizontal multinational or vertical multinational. Horizontal multinational’s produce the same good or services as abroad. This foreign direct investment (FDI) is done to strategically place production closer to the target market. Doing this provides advantages surrounding transportation cost while enhancing learning associated with local needs. A vertical multinational is one that fragments a portion of its good to take advantage of lower cost (i.e. cheap labor). Markusen and Maskus found horizontal multinational replaces trade whereas, a vertical multinational positively correlates with trade (Markusen & Maskus, 2001).
Illegal immigration has many diverse effects on the United States economy. Some people argue that the negative outweigh the positive, but there is no doubt that immigrants do carry a critical role.
I found this article "Foreign direct investment: Companies rush in with the cash" on the financial times website (www.FT.com) published December 11, 2002 written by John Thornhill. The reason for choosing this article is my personal interest in the Chinese economy and its attractiveness to the foreign investors. Apart from the foreign direct investment this topic has also helped me in understanding the impact of Chinese economy on the global market.
Since foreign aid programs are here to stay, it is important to focus on the enormous potential for foreign aid to be effective. One such way is through augmenting a state’s ability to attract foreign direct investment (FDI). FDI is a good option because it has the potential to be a more long-term solution than pub...
In 2000, the United States was the leading country containing more than 10 million highly skilled immigrants, which was an increase of over 5 million highly skilled immigrants from 1990, followed by Canada, Australia, United Kingdom, and Germany.
One of the most well accepted models of FDI is Buckley and Casson’s (1976) internalisation theory, who developed a model of MNCs and FDIs centered around the interrelationship between market imperfections, knowledge and the internalisation of production and consumption (Buckley and Casson, 2009). Specifically, the theory recognized that multinational corporations are both horizontally and vertically organized, and that the “the vertically integrated firm internalises a market for an intermediate product, just as the horizontal MNE [multinational enterprise] internalises markets for proprietary assets” (Caves, 1996: p.13). In addition, internalisation will occur, and multinational corporations will expand only as far as the advantages, including barriers to entry, are not offset by the costs of control, communi...
The largest immigrant population in the world has been known to seek plenty of refuge, here in the United States. Although America is only the third most populated country in the world, we are known to be the “most populated” simply because of the growing amount of immigrants that come yearly. The immigration policy that is maintained here in the United States has always been a very argumentative topic. There is plenty to say on the mere and obvious differences in cultural lifestyles and issues, however it is arguable to say that the effects of the economy and immigration are quite easy to understand. Through analyzation of an economic perspective, there has been little to no support that is behind the notion that arrivals of immigrants and their labor practices have had a deliberate and harsh impact on the jobs that are available for Americans. My argument, along with further economic theory predictions and academic
In the United States today there are over 11 million immigrants. Immigration has always been a key factor in the growth of our country and its economy, however, some people such as researcher Jim Demint, argue that immigration has gone too far, and instead of helping our cause, immigrants are adding to our $17 trillion dollar debt. Demint explains immigrants are creating more tax for tax payers, reducing wages, soaking up benefits without being a U.S. citizen, creating less employment opportunities for natives, and imposing more costs on schools, hospitals, and other services (Demint). On the other hand, researchers suggest that immigration helps to expand our economy. Doug Bandow of Forbes
“Exchange rates are the amount of one country’s currency needed to purchase one unit of another currency (Brealey 1999, p. 625)”. People wanting to exchange some money for their vacation trip will not be too much bothered with shifts if the exchange rates. However, for multinational companies, dealing with very large amounts of money in their transactions, the rise or fall of a currency can mean getting a surplus or a deficit on their balance sheets. What types of exchange rate risks do multinational companies face?
Woodward, D. (2001). The next crisis?: Direct and equity investment in developing countries. London: Zed Books.
In the following essay I will try to compare two highly developed economies, Japan and The United Kingdom. I will emphasize the success of their economies and how human capital, advancing technology (innovation), and FDI have contributed to their current success or failure. I will briefly discuss the contemporary history of each country, thoroughly cover their current conditions, and end with expectations for their future.
It is well documented that Malaysia is a country that experiences fast and rapid growth in its overall economy. According to the Asian Development Bank (ADB), Malaysia has the potential to rise as one of the seven drivers of the Asian economy by 2050 led by China, India, Indonesia, Japan, South Korea, Malaysia and Thailand (Malaysian Insider, 2011). In the 1970’s, Malaysian companies started to focus on foreign investment but the numbers were still small. These investments started off focusing on banking and finance sectors of developed countries such as the US and Australia. The country only began venturing in outward foreign direct investments (OFDI) in the 1990’s. Malaysia’s OFDI has skyrocketed from a low RM0.45 billion in 1980 to RM10.41 billion in 1997, and further to RM36.7 billion in 2007 (Goh and Wong, 2011). Malaysia has been experiencing a peculiar trend when it comes to foreign investments. The country has encountered a drastic drop in FDI inflows whereas FDI outflow has been increasing at a substantial rate especially in 2007 as seen in the graph. It is worth arguing whether OFDI is a able to substitute domestic investments and will it cause a significant drop in output in the domestic markets (Stevens and Lipsey, 1992). From a different viewpoint, OFDI can also complement domestic markets and increases local industry activities by home country multinationals and, as a result boost up domestic output ( Desai et al., 2005). Therefore, there exist a conceptually causal relationship between OFDI and the domestic economic growth that could result in either way. This essay revolves around the efforts of determining the push and pull factors that influences OFDI and critically analyzing the transition effects of Malaysia to...
...MENT ENCOURAGEMENT OF GLOBAL BUSINESS FOREIGN GOVERNMENT ENCOURAGEMENT Governments also encourage foreign investment. The most important reason to encourage investment is to accelerate the development of an economy. An increasing number of countries are encouraging investments with specific guidelines toward economic goals. MNCs may be expected to create local employment, transfer technology, generate export sales, stimulate growth and development of the local industry. US GOVENRMENT ENCOURAEMENT The US government is motivated for economic as well as political reasons to encourage American firms to seek opportunities in the countries worldwide. It seeks to create a favorable climate for overseas business by providing the assistance by providing the assistance that helps minimize some of the troublesome politically motivated financial risks of doing business abroad.
Sukar, A., Ahmed, S., & Hassan, S. (n.d.). THE EFFECTS OF FOREIGN DIRECT INVESTMENT ON ECONOMIC GROWTH. Southwestern Economic Review.