International Management - FDI, globalization - Essay Example

Though it is impossible to make an accurate determination of the present value of foreign investments, the possibility of getting an idea of the rate and amounts of such investments and of the places in which they are being made interests' managers and government leaders (Ball & McCulloch 1982). Developed and developing countries as well as countries in transition consider foreign direct investment as one of the most important channel through which countries may obtain resources for its development (Hunya 2001).

Each home and host country government views the MNE and its direct investment projects as generators of income, employment, technology, and so on that must be regulated to obtain the best gains for the government (Grosse & Kujawa 1988). Investors from industrialized countries want to come to developing countries for the reasons that: They apprehend that the return on capital in their home country is not adequate; that they want to combine their capital with the cheap labor of the host country to reduce the cost of production; and that they want to utilize the raw materials of developing countries near their source.

On the other hand, the host developing countr. Foreign direct investments involve a complex of assets, and among the most prized proprietary asset probably belongs technology. Others are brand names, specialized skills, and the ability to organize and integrate production across countries; to establish marketing network and to have privilege access to the market for non-proprietary assets. All these aspects mean that multinationals can contribute significantly to economic and social development in host countries.

Assets include: (1) Capital. FDI brings in investible financial resources to host countries. In distinction to other sources of capital, multinationals typically invest in long-term projects. FDI also complete insufficiently generated financial capital (shortage of savings) at host countries; (2) Capital access. Multinationals have usually better conditions to obtain banking or other capital credits. This is due to the larger opportunity set of funding sources around the world from which it can choose; (3) Technology.

Multinationals can bring modern technologies and they can raise the efficiency with which existing technologies are used. Moreover they may even set up local R&D facilities, upgrade technologies as innovations emerge and consumption patterns change, and stimulate technical efficiency and competitors, by providing assistance; (4) Market Access. Multinationals may positively influence the access to export markets for goods and services that are already produced in host countries, helping them switch from domestic to international markets and for new activities that exploit a host economy's comparative advantages; (5) Skills and management techniques.

Multinationals employ and have worldwide access to individuals with advanced skills and