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Feb. 8- 2010 FDI(for the Exam)

Feb. 8- 2010 FDI(for the Exam) - The resource curse •...

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FDI(For Exam) Foreign Direct Investment(FDI) : FDI refers to capital flows to a foreign country that involves the acquisition or construction of manufacturing plants and other facilities. FDI vs. Portfolio investment Managerial control At least 10% of ownership can have a variety of ownership structures (joint-ventures; wholly-owned). Can involve either creation of new assets (import of machinery and other capital), or purchase of existing assets. Features: “outside the country, but inside the firm.” FDI comes in a “package” Capital Technology Management skills Access to markets Patterns: Resource-based (mining and agriculture) until 1960
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Unformatted text preview: The resource curse • Manufacturing FDI took off in the 1950s Stage 1: U.S.D Western Europe Stage 2: U.S. & Western Europe D Asia • Service-Sector FDI since the 1990s Outsourcing Offshore investment FDI: The Microeconomic Perspective: • Firms have choices: Where they locate those activities. Which activities they perform. How the activities should be linked together . John Dunning’s Eclectic Theory of FDI: • FDI will occur when the firm perceives that all three of the following factors are present (LOI): Locational advantages – L Ownership advantages – O Benefits to internalization – I...
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