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After completing this chapter, students will be able to: Recognize current trends regarding foreign direct investment (FDI) in the world economy, explain the different theories of FDI, understand how political ideology shapes a government's attitudes toward FDI, describe the benefits and costs of FDI to home and host countries,. | International Business 9e By Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 Foreign Direct Investment 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 Most cross-border investment is in the form of mergers and acquisitions rather than greenfield investments Why Do Firms Choose Acquisition Versus Greenfield Investments? Firms prefer to acquire existing assets because mergers and acquisitions are quicker to execute than greenfield investments it is easier and perhaps less risky for a firm to acquire desired assets than build them from the ground up firms believe that they can increase the efficiency of an acquired unit by transferring capital, technology, or management skills What Are The Patterns Of 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 Both the flow and stock of FDI have increased over the last 30 years LO1: Recognize current trends regarding FDI in the world economy. What Are The Patterns Of FDI? FDI Outflows 1982-2010 ($ billions) What Are The Patterns Of FDI? FDI Inflows by Region 1995-2010 ($ billion) What Are The Patterns Of FDI? The growth of FDI is a result of A fear of protectionism want to circumvent trade barriers Political and economic changes deregulation, privatization, fewer restrictions on FDI New bilateral investment treaties designed to facilitate investment The globalization of the world economy many companies now view the world as | International Business 9e By Charles W.L. Hill McGraw-Hill/Irwin Copyright © 2013 by The McGraw-Hill Companies, Inc. All rights reserved. Chapter 8 Foreign Direct Investment 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 Most cross-border investment is in the form of mergers and acquisitions rather than greenfield investments Why Do Firms Choose Acquisition Versus Greenfield Investments? Firms prefer to acquire existing assets because mergers and acquisitions are quicker to execute than greenfield investments it is easier and perhaps less risky for a firm to acquire desired assets than build them from the ground up firms believe that they can increase the .
