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International Business Chapter 8. Foreign Direct Investment
27 cards·by AntonellaAc
When FDI occurs?
When a firm invests directly in facilities to produce or market a product in a foreign country.
Multinational Enterprise(MNE)
What is the flow of FDI and what the stock of FDI?
Flow refers to the amount of FDI undertaken over a given period (normalaly 1 year), stock
refers to the total accumulated at a given time
What has happened with the flow and stock of th FDI in the past 35 years?
We have seen a marked increase in both
During the 80's and 90's, what country was often the favorite target for FDI inflows?
United States
What is a Greenfield Investment?**
Establishment of a new operation in a foregin country
What ir Mergers & acquisitions?**
minority, majority or full stake
Why FDI drivers had appeared? What is their function?**
Beause of political and economic changs whish shift toward democratic political
institutions and free market economies. Globaliz. wrld econo
What is the name for the flow of FDI out of a country?
Outflows of FDI
What is the name for the flow of FDI into a country?
Inflows of FDI
What countries are the ones that recieve more FDI inflows?
US, Hong Kong, China, Ireland, Netherlands, Switzerland, Singapore, Brazil, Canada,
India.
Benefits of acquiring
Quicker, acquiring valuable strategic assets, easier and less risky. If you don't do it,
someone will
What exporting means?
Producing goods home and then shipping them to another country
What licensing means?
Granting a foreign entity the right to produce and sell the firms product in return for a
royalty fee on every unit sold.
What are the disadvantages of exporting?
Transport costs (low value to weight ratio), import tariffs and quotas
What are the disadvantages of licensing?
technological leakage, no control over business activities, imposible to license
intangibles
What is market failure?
situation in which the allocation of goods and services is not efficient. Market is being
unethical
What are the FSA's?
Are unique capabilities proprietary to the organization, can be tech or knowledge based or
can reflect managerial and/or marketing skills
What is the name for the situation when you do business yourself instead of with someone else?
Internalization
What do the firms based in oligopolistic industries tend to do? (Oligopolistic reaction -
Knickerbocker 1973)
Imitte each other
What factors does the OLI Framework use?
Categories of advantages: Ownership, Location and Internalization & Forms of market entry:
Licensing, export, FDI
What is the radical view of politifal ideology and FDI?
MNE is an instrument of imperialist domination. Tool for exploiting host countries. Less
developed backward and dependent
What is the free market view based on Smith and Ricardo?
MNE is an instrument for dispersing goods and servies to the most efficient locations. Theory
of comparative advantage
What is the pragmatic nationalistic view?
It has benefits (bring capital, skills, technology and jobs) and costs (Profits my go
abroad).
What are the host country benefits of FDI?
Resource transfer effects, employment, balance of payment
What are the costs for the host country of FDI?
Adverse effects on competition, adverse effect on the balance of payments, loss of national
sovereignty and autonomy
The benefits of FDI for the home-country
Repatriation of earnings and export of subsidiaries, learning effects, demand for home
country expats
Costs of FDI for the home-country
Initial capital outflow, increased imports, employment effects