Most foreign direct investment is undertaken by firms and multinational corporations, who hope to benefit from some of these advantages:
Agim,
I can think of some standard reasons for why FDI would be favoured over say exporting or lisensing.
A firm can export to another country, but FDI will be better when transportation costs and barrier to trade are high.
Also, a firm can license its know-how, but FDI will allows it to get better control over its technology, operations, and business strategy. There are somethings like a firm’s capability that cannot be licensed.
FDI is an alternative means for firms to grasp an opportunity in a foreign country. A firm engage in FDI with the motives of resource seeking, market seeking and non-marketable asset seeking. Other motives of firm in engaging FDI includes internationalization decisions, international expansion and upgrading their effort to undertake higher value-adding activities abroad. Some of the link may be usefull for getting the subject insight
http://www.diva-portal.org/smash/get/diva2:131423/FULLTEXT01.pdf
https://papers.ssrn.com/sol3/papers.cfm?abstract_id=1283573
http://www.etsg.org/ETSG2008/Papers/Franco.pdf
Dear Prof. Ramrattan, Prof. Chaubey and Prof. Neubert,
Thank you for sharing your valuable opinions on this discussion!
Dear Agim
FDI (as opposed to exporting, licensing, or partnership) is preferred in order to retain control of operations (product or service or both) especially the quality protecting both the reputation of the corporate/brand name and intellectual property.
Prof. Michael Neubert, I am assuming you have a name for your model. Could you please share the name, if you don't mind?
Regards
I think in order to understand this, you could look at the OLI model/Eclectic framework i.e. a company needs all three advantages -Ownership, Location and internalization in order to successfully engage in FDI and based on that they would choose different entry modes to enter into a country i.e. exporting,licensing, Joint venture, Strategic Alliance, Greenfield FDI etc.
You could refer to the Dunning paper in 1979 on the OLI.
- Badges
- Science topic
- Similar topics
- Philosophy
- Philosophy Of Science
- Reasoning