Class notes
International Business Week 6 Foreign Direct Investment
- Course
- Institution
Lecture notes to get a first!
[Show more]
Seller
Follow
chilllax
Content preview
Week 6: Foreign Direct Investment18 October 2022 15:11
FOREIGN DIRECT INVESTMENT
- WHen firm invest directly production or other facilities, effective control, in a foreign country
- HORIZONTAL: replicate its business model in a different country (Vodafone in Ghana)
- VERTICAL: take control of some part of the supply chain (e.g. Starbucks and coffee farms in Costa Rica)
WHY CONPANIES INTERNATIONALISE
3 conditions
• Ownership
• Location
• Internalisation
The significance of each advantage and the configuration between them is likely to be
context specific and to vary across industries
Ownership: the (net) competitive advantages which firms of one nationality possess over those of another
nationality through ownership and/or coordination of assets in supplying markets.
FIRM-SPECIFIC ADVANTAGES:
- Proprietary technology
- Managerial/marketing skills
- Product differentiation
- Large size
- Large capital requirements
Location: The extent to which firms choose to locate these value-adding activities outside
their national boundaries
LECTURES Page 1
, their national boundaries
Advantages:
- Natural resources
- Efficient and skilled, low-cost labor
- Trade barriers restricting imports
Internalisation: The extent to which firms perceive it to be in their best interests to
internalise the markets for the generation and/or the use of these assets (if not to
sell/lease them)
ADVANTAGES:
- High costs of making and enforcing contracts
- Buyer uncertainty about value of tecknology being sold
- Need to control use or resale of product
- Advantages using price discrimination or cross-subsidization
SUMMARY:
- Range of potential advantages to FDI
- Conditions for internationalisation considered as ownership, location and internalisation (OLI)
- OLI provide useful way considering key issues but not complete "theory" of FDI/INTERNATIONALISATION
- Importance of international rules, shared understanding becomes apparent when consider nature of FDI
Different types of FDI
LECTURES Page 2
The benefits of buying summaries with Stuvia:
Guaranteed quality through customer reviews
Stuvia customers have reviewed more than 700,000 summaries. This how you know that you are buying the best documents.
Quick and easy check-out
You can quickly pay through credit card or Stuvia-credit for the summaries. There is no membership needed.
Focus on what matters
Your fellow students write the study notes themselves, which is why the documents are always reliable and up-to-date. This ensures you quickly get to the core!
Frequently asked questions
What do I get when I buy this document?
You get a PDF, available immediately after your purchase. The purchased document is accessible anytime, anywhere and indefinitely through your profile.
Satisfaction guarantee: how does it work?
Our satisfaction guarantee ensures that you always find a study document that suits you well. You fill out a form, and our customer service team takes care of the rest.
Who am I buying these notes from?
Stuvia is a marketplace, so you are not buying this document from us, but from seller chilllax. Stuvia facilitates payment to the seller.
Will I be stuck with a subscription?
No, you only buy these notes for $9.70. You're not tied to anything after your purchase.
Can Stuvia be trusted?
4.6 stars on Google & Trustpilot (+1000 reviews)
67474 documents were sold in the last 30 days
Founded in 2010, the go-to place to buy study notes for 14 years now