Fdi and Mnc
Foreign Direct Investments and Multinational Corporations
Introduction
In a globalised world and economy, foreign direct investment (FDI) flows have boomed dramatically in recent decades. Factors contributing to the growth of FDI are rapid growth in technological advancement, low interest funds from development banks, bilateral investment treaties and the welcoming developing countries have given FDI its importance in helping the economy growth. This led to the rapid growth of FDI flows around the world in the last 20 years period. FDI outflows increase from $53.7 billion in 1980, to a staggering $1.4 trillion in the year 2000 (Brooks et al, 2003). Foreign direct investment (FDI) involves the real investments or ownership in the land, inventories, factories and capital goods in foreign countries where investor have control and authority over the invested capital. Examples of FDIs involves investors purchasing a minimum of 10% of the firm’s stock or more, setting up a wholly owned subsidiary company, joint venture with another firm and merging or acquisition of another company. Major market players who are always on the lookout for investing in foreign countries are multinational corporations (MNC). Multinational corporations (MNC) plays an important role in bringing capital and employment to the host countries and since a few decades back, MNCs took a great amount of interest in investing their business in foreign markets because of the various advantages in foreign countries over their home country. In this essay, I will be focusing on the determinants, characteristics, cost and benefits for host and investing countries for FDI and MNC.
Determinants & Characteristics
There are various reasons for FDI to arise but one major reason is that investors foresee promising returns of profits of their investments in foreign nations before they invest. Every investor wants to maximize their returns as much as they can. The determinants of FDI have been
Introduction
In a globalised world and economy, foreign direct investment (FDI) flows have boomed dramatically in recent decades. Factors contributing to the growth of FDI are rapid growth in technological advancement, low interest funds from development banks, bilateral investment treaties and the welcoming developing countries have given FDI its importance in helping the economy growth. This led to the rapid growth of FDI flows around the world in the last 20 years period. FDI outflows increase from $53.7 billion in 1980, to a staggering $1.4 trillion in the year 2000 (Brooks et al, 2003). Foreign direct investment (FDI) involves the real investments or ownership in the land, inventories, factories and capital goods in foreign countries where investor have control and authority over the invested capital. Examples of FDIs involves investors purchasing a minimum of 10% of the firm’s stock or more, setting up a wholly owned subsidiary company, joint venture with another firm and merging or acquisition of another company. Major market players who are always on the lookout for investing in foreign countries are multinational corporations (MNC). Multinational corporations (MNC) plays an important role in bringing capital and employment to the host countries and since a few decades back, MNCs took a great amount of interest in investing their business in foreign markets because of the various advantages in foreign countries over their home country. In this essay, I will be focusing on the determinants, characteristics, cost and benefits for host and investing countries for FDI and MNC.
Determinants & Characteristics
There are various reasons for FDI to arise but one major reason is that investors foresee promising returns of profits of their investments in foreign nations before they invest. Every investor wants to maximize their returns as much as they can. The determinants of FDI have been
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