International Business

In: Business and Management

Submitted By vpatchu
Words 21949
Pages 88
Foreign Direct Investment

Learning objectives

• Be familiar with current trends regarding FDI in the world economy.

• Understand the different theories of foreign direct investment.

• Appreciate how political ideology shapes a government’s attitudes towards FDI.

• Understand the benefits and costs of FDI to home and host countries.

• Be able to discuss the range of policy instruments that governments use to influence FDI.

• Articulate the implications for management practice of the theory and government policies associated with FDI.

The focus of this chapter is foreign direct investment (FDI). The growth of foreign direct investment in the last 25 years has been phenomenal. FDI can take the form of a foreign firm buying a firm in a different country, or deciding to invest in a different country by building operations there.

With FDI, a firm has a significant ownership in a foreign operation and the potential to affect managerial decisions of the operation.

The goal of our coverage of FDI is to understand the pattern of FDI that occurs between countries, and why firms undertake FDI and become multinational in their operations as well as why firms undertake FDI rather than simply exporting products or licensing their know-how.

The opening case describes the international growth of Spain’s Telefonica. Until the 1990s, Telefonica was a typical state-owned firm. Today, it has expanded into Latin America and Europe. The closing case explores Mittal Steel’s expansion from a small, family-run operation in India, to being the world’s largest steel company headquartered in Rotterdam.


Opening Case: Spain’s Telefonica


Foreign Direct Investment in the World Economy Trends in FDI…...

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