Chapter 8 - FDI

Chapter 8 - FDI

1. High transportation or tariffs may be barriers to exports

2. Two forms of FDI

   • buying a firm in a foreign country
   • establishing operations there

3. Prefer FDI over licensing when

   • Protect knowledge know how
   • tight control over manufacturing etc
   • not suitable to licensing

4. Knickerbocker theory

5. Dunning - FDI to exploit resource endowments location specific

6. Political ideology

   • Radical stance
   • Noninterventionist
   • Pragmatic nationalism

7. Benefits & Costs to Host Countries

   • + employment
   • + BOP effect
   • + resource transfer effects
   • - national sovereignty
   • - competition
   • - BOP

8. Benefits & costs to source countries

9. Govt encourage FDI through incentives

10. Govt discourage FDI through ownership restrictions and performance requirements