Foreign Direct Investment必看课件资料.ppt

Essential Reading The Whole Chapter Outline Global Trends in FDI Why Do Firms Invest Overseas? Cross-Border Acquisitions Political Risk and FDI Global Trends in FDI Foreign Direct Investment often involves the establishment of production facilities abroad. Greenfield Investment Involves building new facilities from the ground up. Cross-Border Acquisition Involves the purchase of existing business. Global Trends in FDI The FDI between developed countries accounts for 80% of the total world FDI. The developed countries are the main source of FDI outflows. The acquisition has gradually taken the place of the traditional Greenfield investment. Average Annual FDI (in Billions) Why Do Firms Invest Overseas? Trade Barriers Labour Market Imperfections Intangible Assets Vertical Integration Product Life Cycle Shareholder Diversification Trade Barriers Government action leads to market imperfections. Tariffs, quotas, and other restrictions on the free flow of goods, services and people. Trade Barriers can also arise naturally due to high transportation costs, particularly for low value-to-weight goods. Labour Market Imperfections Among all factor markets, the labor market is the least perfect. Recall that the factors of production are land, labor, capital, and entrepreneurial ability. If there exist restrictions on the flow of workers across borders, then labor services can be underpriced relative to productivity. The restrictions may be immigration barriers or simply social preferences. Labour Market Imperfections Intangible Assets Coca-Cola has a very valuable asset in its closely guarded “secret formula”. To protect that proprietary information, Coca-Cola has chosen FDI over licensing. Since intangible assets are difficult to package and sell to foreigners, MNCs often enjoy a comparative advantage with FDI. Vertical Integration MNCs may undertake FDI in countries where inputs are available in order to secure the supply of inputs at a stable accounting price. Vertical int