Theories of Internationalisation and Relevance in Explaining Global Patterns of Foreign Direct Investment - Essay Example

Comments (0) Cite this document
Summary
Economic activities crossing the boundaries of countries have been taking place long before the current trend of globalisation. This paper shall now discuss the theories of internationalisation and its relevance in explaining the global patterns of foreign direct investment (FDI). …
Download full paperFile format: .doc, available for editing
GRAB THE BEST PAPER91.3% of users find it useful
Theories of Internationalisation and Relevance in Explaining Global Patterns of Foreign Direct Investment
Read TextPreview

Extract of sample
"Theories of Internationalisation and Relevance in Explaining Global Patterns of Foreign Direct Investment"

Download file to see previous pages In effect, countries can gain profits if they direct their activities to the generation of products and services which are most profitable. This theory relates the situation where a country creates products and services for its people, and for export in terms of surplus. As a result, it is favourable for countries to import the products and services where they also have an economic disadvantage (Morgan and Katsikeas, 1997). The economic advantage and disadvantage may be based on differences in available resources, labour, and technology. The classical theory argues that the foundation of international trade would come from the differences in the qualities of production and available resources which are also based on differences in natural and acquired advantages (Morgan and Katsikeas, 1997). Another theory of internationalisation contrasts with the classical trade theory. The factor proportion theory discusses that countries usually produce the export products and services which support significant production advantages that they have, and they will import the products and services which would need large scores of production factors that may be limited (Hecksher and Ohlin, 1933). This theory supports the idea of economic advantage by evaluating the endowment and costs related to factors of production (Morgan and Katsikeas, 1997). The above theories do not completely explain the current trends in international trade. For one, the rise of technological development and of multinational corporations during the 1960s called for new theories on international trade. At such time, the product life cycle theory relating to international trade was considered a significant basis in explaining trade patterns and MNC expansions (Morgan and Katsikeas, 1997). Such theory...
This essay stresses that financial arbitrage is also another opportunity for securing strategic flexibility for FDIs. MNCs can circumvent the restrictions imposed by the host government, mostly those which relate to finance, remittance, and foreign exchange in order to secure and support their new and innovative products. Another opportunity relates to the transfer of information. Flexibility ensures that MNEs can benefit from the act of singling out available opportunities, assessing the world markets to match the involved buyers and sellers and avoiding the barriers to effective trade relations.
This paper makes a conclusion that based on the above discussion, the theories of internationalisation like the classical trade theory acknowledges the fact that trade relations and investments are dictated by the needs of investors and of the consumers. Where the need is great and the profit would best be gained, the FDIs would likely be made. The current global trends in investments indicate how the emerging economies have manifested the greatest need and the most profit for investments, for which reason investors have directed their economic activities to these areas. The internationalisation theory generally indicates how the current trends in the economy are gravitating towards more open forms of trade and economic relations. These FDIs are but another manifestation of internationalisation, and these investments would likely find bigger avenues for investment in the years to come. ...Download file to see next pagesRead More
Cite this document
  • APA
  • MLA
  • CHICAGO
(“Theories of Internationalisation and Relevance in Explaining Global Essay”, n.d.)
Theories of Internationalisation and Relevance in Explaining Global Essay. Retrieved from https://studentshare.org/business/1458365-theories-of-internationalisation-and-relevance-in-explaining-global-patterns-of-foreign-direct-investment
(Theories of Internationalisation and Relevance in Explaining Global Essay)
Theories of Internationalisation and Relevance in Explaining Global Essay. https://studentshare.org/business/1458365-theories-of-internationalisation-and-relevance-in-explaining-global-patterns-of-foreign-direct-investment.
“Theories of Internationalisation and Relevance in Explaining Global Essay”, n.d. https://studentshare.org/business/1458365-theories-of-internationalisation-and-relevance-in-explaining-global-patterns-of-foreign-direct-investment.
  • Cited: 0 times
Comments (0)
Click to create a comment or rate a document
CHECK THESE SAMPLES - THEY ALSO FIT YOUR TOPIC
Foreign Direct Investment
...). “Foreign Direct Investment for Development: MAXIMISING BENEFITS, MINIMISING COSTS” [PDF]. Available at http://www.oecd.org/dataoecd/47/51/1959815.pdf [Accessed: July 27, 2011]. Moosa, I. A. (2002). Foreign direct investment: Theory, evidence, and practice. New York, USA: Palgrave Macmillan. Nishioka, S. (2005). “An Explanation of OECD Factor Trade with Knowledge Capital and the HOV Model” [PDF]. Center for Economic Analysis, Working Paper No. 05-06. Available at http://www.colorado.edu/Economics/CEA/WPs-05/wp05-06/wp05-06.pdf [Accessed: July 28, 2011]. Rodriguez, F. & Rodrik, D. (2000). “Trade Policy and Economic...
11 Pages(2750 words)Assignment
Foreign direct investment
...Foreign direct investment Table of Contents Introduction 3 Importance of FDI 3 Impact of FDI on the economics of a region 4 Inward and Outward FDI 6Modes of FDI 7 Lessons from inward investment 7 Introduction Foreign direct investment involves acquisition of managerial control in a company. The threshold of this form of ownership is 10% or more in UK. This varies across countries. With the liberalization of the various global economies in Africa and Asia this form of investment has grown considerably. Foreign direct investment (FDI)...
6 Pages(1500 words)Assignment
Foreign Direct Investment (FDI)
...in the development of global business enterprises. Kennedy (2001, p. 585) say that the definition of foreign direct investment has been broadened with the increased change in the patterns of global investment by companies. As a result, FDI includes acquisition of managerial interests in companies and enterprises in foreign countries. The managerial interest may not involve investment in buildings or equipment but managerial decisions are determined by executives who are foreign to the host country. The rapid growth of companies which is attributed to the...
10 Pages(2500 words)Essay
Foreign Direct Investment
... aspect of IFIs in the past decades was the growth of globalization and the increasingly integrated role of the capital markets. In the early 1980s, a bulge in the level of capital flows in the direction of emergent markets became more prominent, on the basis of managing the oil revenues. Yet this degenerated into the 1982 economic meltdown due to accumulated debts. After a lull of economic crisis and the development of stronger macroeconomic policies which yielded stability, the world economy registered a sharp rise in the capital flows in the early 1990s. This came at a time when many countries that sought to rely upon direct foreign investments and credit services from non-banking organizations, accounted for the primary source... in the...
17 Pages(4250 words)Essay
Japan Foreign Direct Investment
...enterprises, liberalization of their foreign exchange markets and establishment of fiscal incentives like tax holidays in order to attract more foreign direct investments. The quest for increased foreign direct investment stems from the assumption that foreign direct investment leads to economic benefits within the host country, which assumptions are based on economic theory. In addition, there is existing empirical research that has further highlighted the benefits of foreign direct investment....
7 Pages(1750 words)Research Paper
Foreign Direct Investment Essay
..., a US MNE may set up a plant in Hungary and supply all the Central European markets from this production site. In this case, Hungarian exports to third countries would increase. Ekholm et al. (2003) analyse such situation in which the MNE invests in one country and uses this production site as an export platform for supplying other markets. This section describes other channels through which FDI may affect host country's exports, in addition to those described in the theory of MNE. The impact of FDI on host country exports is not only direct, through the exports of the foreign affiliates, but there may be important side effects, which may influence the export performance...
6 Pages(1500 words)Essay
Foreign Direct Investment Article
..., (No Date), retrieved December 1, 2008, from http://www.buec.udel.edu/fange/475/Entry_Mode.ppt Marchick D.M. and Slaughter M.J., (June 2008), Global FDI Policy, Yale Law School, retrieved December 1, 2008, from http://www.law.yale.edu/documents/pdf/cbl/Marchick_FDI.pdf Moon C.W. and Shin G.C., (No Date), Overcoming Cultural Gap Through Firm Cultural Diversity In International Corporate Venturing: An Empirical Test Of Learning Perspective, retrieved December 1, 2008, from http://marketing.byu.edu/htmlpages/ccrs/proceedings99/moon.htm Slangen A. and Hennart J., (No Date), Cultural Distance And Foreign Direct Investment: A Comprehensive Model Explaining...
10 Pages(2500 words)Article
Foreign Direct Investment
...and thereby it is able to gain the competitive advantage. Bradley [3] also explores other theories that drive foreign direct investment by a multinational firm, including the international production theory, which postulates that the question of whether and to what extent a multinational firm may decide to initiate production activity within another country and make significant investments, will depend upon the perceived relative advantages between the facilities available on home turf and the implied advantages and resources involved in locating to another country. Morgan and Katsikeas [9] have closely examined all...
9 Pages(2250 words)Essay
Foreign direct investment
...The impact of foreign direct investment on economic growth of less developed countries By Ezekiel Eyamekuare Outline: Introduction: Aims and objectives: Motivation: Development Economics and its usefulness in this study: A Brief Review of Literature: Methodology: Discussion: An outline of the chapters to be included in this project: Reference: Introduction: Foreign direct investment (FDI) has been one of the important characteristics of the global economy for the past twenty years. It has developed at an unparalleled pace for over a decade. Liberalization of overseas investment regime is an...
24 Pages(6000 words)Research Paper
Foreign direct investment
...Foreign Direct Investment Though most companies operating globally choose to export to other market entry modes, there are situations in which exporting may not be feasible. In such circumstances, companies may opt for direct investment within other countries, or enter markets via diverse collaborative strategies that enable entities to diversify its assets and risk across diverse countries by engaging in contractual agreements with multiple potential partners. Companies may find it advantageous by producing in foreign countries compared to exporting to those countries based on a variety of reasons (Froot 57). #1 Why...
2 Pages(500 words)Essay
sponsored ads
We use cookies to create the best experience for you. Keep on browsing if you are OK with that, or find out how to manage cookies.
Let us find you another Essay on topic Theories of Internationalisation and Relevance in Explaining Global Patterns of Foreign Direct Investment for FREE!
Contact Us