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Factors affecting Foreign Development Investments - Research Paper Example

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This paper discusses some of the reasons why firms choose to invest abroad, issues about changing production because of foreign investment, factors influencing foreign direct investment, attempts to enhance foreign investment and reasons why large companies would not invest abroad. …
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Factors affecting Foreign Development Investments
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Download file to see previous pages Today, more and more worldwide known companies prefer to operate in foreign markets through two distinct strategies of internationalization, that is, exports or foreign direct investment. However, there are numerous issues that challenge foreign direct investment (FDI), and that is why some firms have opted to stay away from foreign direct investment. Some of the reasons include financial volatility, problems with capital inflows, contagion, export processing zones, investment and labor, environmental issues and inequality caused by globalization.

Internationalization refers to the process of expanding enterprises in international markets. Over recent decades, there has been an increasing level of internationalization in every kind of industry, which has led to a rapidly growing interest in gaining and maintaining a competitive advantage on new international trade arenas (Casillas et. al., p26). As a result, today more and more worldwide known companies prefer to operate in foreign markets through two distinct strategies of internationalization, that is, exports or foreign direct investment (Conconi et. al., p13). Internationalization theory postulates that production by one company as opposed to many companies is much beneficial and this is one of the major reasons why most companies would rather extend its operations to a different location (internationationalization). (Bayraktutan& Yusuf, 23) In providing accounts why internationalization has survived in the unlikely environment, it suggests that technological transfer among the Multinational Corporations has played a key role in that, most of the developing countries are not able to access modern technologies that are associated with large production. This makes it possible for Multinational Enterprises (MNE) to get access to such developing nations because of their financial muscles.

The objective will be followed by the inquiry which deals with the question of how these companies should behave in terms of entry mode, subsidiaries and activities performed.   ...Download file to see next pagesRead More
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