2. Explain the different theories of fdi. Understand how political ideology shapes a government’s attitudes towards fdi

CHAPTER 7: Foreign Direct Investment

Learning objectives

1. Recognize current trends regarding foreign direct investment (FDI) in the world economy.

2. Explain the different theories of FDI.

3. Understand how political ideology shapes a government’s attitudes towards FDI.

Learning objectives

4. Describe the benefits and costs of FDI to home and host countries.

5. Explain the range of policy instruments that governments use to influence FDI.

6. Identify the implications for managers of the theory and government policies associated with FDI.

OUTLINE

7.1 Introduction

7.2 Foreign Direct Investment in the World Economy

7.3 Theories of Foreign Direct Investment

7.4 Political Ideology and Foreign Direct Investment

OUTLINE

7.5 Benefits and Costs of FDI

7.6 Government Policy Instruments and FDI.

7.7 Focus on Managerial Implications

7.1 INTRODUCTION

OPENING CASE:

Foreign Retailers in India

What Is FDI?

• Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country
• the firm becomes a multinational enterprise
• FDI can be in the form of
• greenfield investments - the establishment of a wholly new operation in a foreign country
• acquisitions or mergers with existing firms in the foreign country

What Is FDI?

• The flow of FDI - the amount of FDI undertaken over a given time period
• Outflows of FDI are the flows of FDI out of a country
• Inflows of FDI are the flows of FDI into a country
• The stock of FDI - the total accumulated value of foreign-owned assets at a given time