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Chapter 7 Student W09

Chapter 7 Student W09 - Chapter7 MainChapterConcepts (FDI...

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Chapter 7 Foreign Direct Investment
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Main Chapter Concepts Types of foreign direct investment (FDI) Reasons why firms use FDI rather than less  risky entry modes Advantages of disadvantages of FDI to host  countries Advantages of disadvantages of FDI to home  countries Policies used to encourage or discourage FDI
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Foreign Direct Investment : when a  firm invests resources in facilities to  produce and/or market a product in a  foreign country Horizontal FDI: investment in the same  industry in which a firm operates at home Vertical FDI: investment in an industry that  provides inputs for a firm’s domestic  operations or that sells the outputs of the  firm’s domestic operations
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Vertical Foreign Direct Investment Backward Vertical FDI: an investment  in an industry abroad that provides  inputs for a firm’s domestic production  processes Forward Vertical FDI: an investment  in an industry abroad that sells the  outputs of a firm’s domestic  production processes
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Transportation Costs Market Imperfections Strategic Behavior Product Life Cycle  Location-Specific Advantages  Explanations for FDI
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Market Imperfections Explanations  for FDI When there are impediments to the  free flow of products between  nations.
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