Chapter_15 - Chapter Outline Global Trends in FDI Why Do...

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Chapter Outline Global Trends in FDI Why Do Firms Invest Overseas? Cross-Border Mergers and Acquisitions Political Risk and FDI
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Global Trends in FDI Foreign Direct Investment often involves the establishment of production facilities abroad. Greenfield Investment Involves building new facilities from the ground up. Cross-Border Acquisition Involves the purchase of existing business.
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Global Trends in FDI Several developed nations are the sources of FDI outflows . About 90% of total world-wide FDI comes from the developed world. Both developing and developed nations are the recipient of inflows of FDI.
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Average Annual FDI (in Billions) 1997-2001 5.5 29.4 1.7 91 65.8 12.6 28.5 46.6 31.1 21 25.3 134.5 139.2 7.4 29.3 43.5 38.8 62.2 8.3 6.7 15 37.1 18.6 25.5 9.3 71.7 202.3 0 50 100 150 200 250 Australia Canada China France Germany Italy Japan Mexico Netherlands Spain Sweden Switzerland United Kingdom States Inflow s Outflow s
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Why Do Firms Invest Overseas? Trade Barriers Labour Market Imperfections Intangible Assets Vertical Integration Product Life Cycle Shareholder Diversification
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Trade Barriers Government action leads to market imperfections. Tariffs, quotas, and other restrictions on the free flow of goods, services and people. Trade Barriers can also arise naturally due to high transportation costs, particularly for low value-to-weight goods.
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Labour Market Imperfections Among all factor markets, the labor market is the least perfect. Recall that the factors of production are land, labor, capital, and entrepreneurial ability. If there exist restrictions on the flow of workers across borders, then labor services can be underpriced relative to productivity. The restrictions may be immigration barriers or simply social preferences.
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Labour Market Costs Around the World (2001) Country Hourly Cost Germany $23.04 U.S. $20.67
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This note was uploaded on 07/16/2011 for the course FINA 5331 taught by Professor Staff during the Spring '08 term at UT Arlington.

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Chapter_15 - Chapter Outline Global Trends in FDI Why Do...

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