Foreign_Direct_Investment

Foreign_Direct_Investment - Chapter 7 Chapter Foreign...

Info iconThis preview shows pages 1–4. Sign up to view the full content.

View Full Document Right Arrow Icon
Chapter 7 Chapter 7 Foreign Direct Investment 7-2 FDI Question: What is foreign direct investment? { Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country { Once a firm undertakes FDI it becomes a multinational enterprise { There are two forms of FDI { A greenfield investment (the establishment of a wholly new operation in a foreign country) { Acquisition or merging with an existing firm in the foreign country 7-3 Foreign Direct Investment in the World Economy { There are two ways to look at FDI { The flow of FDI refers to the amount of FDI undertaken over a given time period { The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time { Outflows of FDI are the flows of FDI out of a country { Inflows of FDI are the flows of FDI into a country
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
7-4 Trends in FDI { Both the flow and stock of FDI in the world economy has increased over the last 20 years { FDI has grown more rapidly than world trade and world output because { firms still fear the threat of protectionism { the general shift toward democratic political institutions and free market economies has encouraged FDI { the globalization of the world economy is prompting firms to undertake FDI to ensure they have a significant presence in many regions of the world 7-5 Trends in FDI FDI Outflows 1982-2007 7-6 The “Great Recession” { A decrease of 39 percent in global FDI flow in 2009 from $US 1.7 trillion to $US 1.0 trillion. { Regarding the mode of entry, cross-border mergers and acquisitions (M&As) were the most affected with a 66% decrease since 2008 (vs. - 23% for greenfield investments). { A modest rebound is expected in 2010 as investment conditions are improving in many countries.
Background image of page 2
The Direction of FDI { Historically, most FDI has been directed at the developed nations of the world, with the United States being a favorite target { FDI inflows have remained high during the early 2000s for the United States, and also for the European Union { South, East, and Southeast Asia, and particularly China, are now seeing an increase of FDI inflows { Latin America is also emerging as an important region for FDI 7-8 The Direction of FDI FDI Inflows by Region 1995 -2007 7-9 The Source of FDI { Since World War II, the U.S. has been the largest source country for FDI { Other important source countries include the United Kingdom, the Netherlands, France,
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Image of page 4
This is the end of the preview. Sign up to access the rest of the document.

This note was uploaded on 10/17/2011 for the course ECON 101 taught by Professor Thompson during the Spring '11 term at Michigan State University.

Page1 / 10

Foreign_Direct_Investment - Chapter 7 Chapter Foreign...

This preview shows document pages 1 - 4. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online