How Do International Institutions Influence FDI?

How Do International Institutions Influence FDI?

• Until the 1990s, there was no consistent involvement by multinational institutions in the governing of FDI
• Today, the World Trade Organization is changing this by trying to establish a universal set of rules designed to promote the liberalization of FDI

What Does FDI Mean For Managers?

• Managers need to consider what trade theory implies about FDI, and the link between government policy and FDI
• The direction of FDI can be explained through the location-specific advantages argument associated with John Dunning
• however, it does not explain why FDI is preferable to exporting or licensing, must consider internalization theory

What Does FDI Mean For Managers?

What Does FDI Mean For Managers?

• A host government’s attitude toward FDI is important in decisions about
• where to locate foreign production facilities and where to make a foreign direct investment
• firms have the most bargaining power when the host government values what the firm has to offer,
• when the firm has multiple comparable alternatives, and when the firm has a long time to complete negotiations