Fdi Report: the Case of Nissan in the Uk

Introduction

Direct investment among the richest countries has been one of the eminent features of the world economy since the mid-1980s. Within this broad trend, Europe features prominently as both a home and host to multinational enterprises (MNEs). Not only did many Japanese and American firms invest massively, but even the most somnolent European firms appeared to awake to the need to look beyond their own national borders. (Thomsen and Woolcock, 1993)

In narrow terms, FDI is simply all capital transferred between a firm and its new or established foreign affiliates. In its broadest sense, FDI represents competition: among workers, governments, firms, markets and even economic systems. (ibid)

The main objective of this report is to illustrate the motives in relation to firm`s desire to locate some production or other activities in a foreign country. In order to do so, several theories that seek to explain why FDI takes place will be discussed, such as Dunning`s Eclectic Paradigm, Vernon`s Life Cycle model, the Knickerbocker Model and others. Moreover, to evaluate the rationale for FDI, references will be made to the case study of Nissan`s automotive investment in North-East England.

Theoretical background

The most commonly seen forms of FDI can be determined as:

• Merges and Acqusitions;

• Privatisation-related investment;

• New forms of investment (joint ventures, strategic alliances, licensing and other partnership agreements);

• Greenfield investment (a new operation);

• Brownfield investment (expansions or re-investment in existing foreign affiliates). (Hill, 2007)

One of the first theories explaining multinational firms was created by Hymer (1959). He develops a specific - advantages theory which states that firms need to have internal – specific advantages over domestic rivals, in particular economies of scale and superior product technology, in order to invest in that country.

Bibliography: Dunning, J.H. and Lundan, S.M. (2008) Multinational enterprises and the global economy 2nd ed., Glos: Edward Elgar Hill, C Hymer, S.H. (1959, published 1976) The International Operations of National Firms: A Study of Direct Foreign Investment, Cambridge: The MIT Press. Jacobson, C.K., Lenway, S.A. and Ring, P.S. (1993) `The Political Embeddedness of Private Economic Transactions`, Journal of Management Studies, Vol. 30, no. 3, pp. 453 – 78. Knickerblocker, F.T. (1973) Oligopolistic Reaction and the MNE, Cambridge: Harvard University. Loewendahl, H.B. (2001) Bargaining with Multinationals, Hampshire: Palgrave. McRae, H. (1997) `The Other Problem with the Jobs Bought from the Japanese`, The Independent, 31 January. Moore, L. (1994) `Developments in Trade and Trade Policy`, in Artis, M.J. and Lee, N. The Economics of the European Union: Policy and Analysis, Oxford: OUP. Morris, J. (1988) `The Who, Why and Where of Japanese Manufacturing Investment in the UK`, Industrial Relations Journal, Vol. 19, no. 1, pp. 31 – 40. Oxelheim, L. And Ghauri, P. (2004) European Union and the Race for Foreign Direct Investment in Europe, Oxford: Elsevier. Sadler, D. (1992) The Global Region: Production, State Policies and Uneven Development, Oxford: Pergamon. Thomsen, S. and Woolcock, S. (1993) Direct Investment and European Integration: Competition among Firms and Governments, London: Pinter Publishers. Vernon, R. (1966) `International Investment and International Trade in the Product Cycle`, Quarterly Journal of Economics, Vol. 80, no. 2, pp. 190 – 207. Vernon, R. (1979) `The product Cycle Hypothesis in a New International Environment`, Oxford Bulletin of Economics and Statistics, Vol. 41, no 4, pp. 255–67.