Foreign direct investment
FDI can also be categorized based on the motive behind the investment from the perspective of the investing firm:
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Resource-Seeking
Investments which seek to acquire factors of production that are more efficient than those obtainable in the home economy of the firm. In some cases, these resources may not be available in the home economy at all (e.g. cheap labor and natural resources). This typifies FDI into developing countries, for example seeking natural resources in the Middle East and Africa, or cheap labor in Southeast Asia and Eastern Europe.
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Market-Seeking
Investments which aim at either penetrating new markets or maintaining existing ones. FDI of this kind may also be employed as defensive strategy;[2] it is argued that businesses are more likely to be pushed towards this type of investment out of fear of losing a market rather than discovering a new one.[3] This type of FDI can be characterized by the foreign Mergers and Acquisitions in the 1980’s by Accounting, Advertising and Law firms.[4]
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Efficiency-Seeking
Investments which firms hope will increase their efficiency by exploiting the benefits of economies of scale and scope, and also those of common ownership. It is suggested that this type of FDI comes after either resource or market seeking investments have been realized, with the expectation that it further increases the profitability of the firm.[3].
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Strategic-Asset-Seeking
A tactical investment to prevent the gain of resource to a competitor. Easily compared to that of the oil producers, whom may not need the oil at present, but look to prevent their competitors from having it.
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Opposition
In the US, in the late 1960s and early 1970s, foreign direct investment became increasingly politicized. Organized labor, convinced that foreign investment exported jobs, undertook a major campaign to reform the tax provisions which affected foreign direct investment. The Foreign Trade and Investment Act of 1973 (or the Burke-Hartke Bill) would have eliminated both the tax credit and tax deferral. The Nixon Administration, influential members of Congress of both parties, and well-financed lobbying organizations came to the defense of the multinational. The massive counterattack of the multinational corporations and their allies defeated this first major challenge to their interests.[5]
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See also
- List of countries by received FDI
- International investment position
- Bilateral Investment Treaty
- Multilateral Agreement on Investment
- Multilateral Investment Guarantee Agency
- International Centre for Settlement of Investment Disputes
- Foreign Affiliate Trade Statistics
- World Association of Investment Promotion Agencies
- Investment promotion agency
- External Commercial Borrowings
- Articles on international trade organizations
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References
- ^ Foreign Direct Investment, United Nations Conference on Trade and Development, www.unctad.org
- ^ Knickerbocker identified this phenomenon in his ‘follow-my-leader’ hypothesis in: Knickerbocker, F. T. (1973). Oligopolistic reaction and multinational enterprise. Boston(Mass.), Division of Research Graduate School of Business Administration Harvard University.
- ^ a b Dunning, J. H. (1993). Multinational enterprises and the global economy. Wokingham, England ; Reading, Mass, Addison-Wesley
- ^ Dunning, J. H., B. Kogut and M. Blomstrom (1990). Globalization of firms and the competitiveness of nations. Lund, Institute of Economic Research Lund University ; Bromley : Chartwell-Bratt c1990
- ^ Gilpin, R. (1986) U.S. Power and the Multinational Corporation- The Political Economy of Foreign Direct Investment. New York: Basica Books, Inc., Publishers
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External links
- FDI.net - foreign direct investment information portal of the World Bank Group
- OECD work on international investment
- World Investment Report (UNCTAD)
- UNECE Database with Historical Trade data
- FDI: A lead driver for Sustainable Development? (Earth Summit 2002)
- Organization for International Investment
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