Vertical FDI:
12-4.2.4.1. Backward Vertical
FDI: Where an industry abroad
provides inputs for a firm's
domestic production process.
12-4.2.4.2. Forward Vertical
FDI: Where an industry abroad
sells the outputs of a firm's
domestic production.
12-4.3. By Motive:
12-4.3.1.Resource-Seeking: Investments
which seek to get factors of production
that are more efficient than those
obtainable in the home economy of the
firm.
12-4.3.2. Market-Seeking: Investments
which aim at either penetrating new
markets or keeping existing ones.
12-4.3.3. Efficiency-Seeking: Investments
which firms hope will increase their
efficiency by maximizing the benefits.
12-4.3.4. Strategic-Asset-Seeking: It is a
tactical investment to stop the loss of
resource to a competitor. Easily
compared to that of the oil producers,
whom may not need the oil at present,
but look to stop their competitors from
having it.
Questions:
1. Give the definition of Investment?
2. Give definition of Foreign direct
investment (FDI)?
3. List types of FDI by direction?
4. List types of FDI by Target ?
5. List types of FDI by Motive ?
6. Translate the following paragraph:FDI
Economists prefer the free flow of
capital across national borders because it
allows capital to seek out the highest rate
of return. Unrestricted capital flows may
also offer several other advantages. First,
international flows of capital reduce the
risk faced by owners of capital by
allowing them to expand their lending
and investment. Second, the global
integration of capital markets can share
to the spread of best practices in
corporate governance, accounting rules,
and legal traditions. Third, the global
movement of capital limits the ability of
governments to follow bad policies.
The gains to host countries from FDI can
take several other forms:
FDI allows the transfer of technology
that cannot be achieved through financial
investments or trade in goods and
services.
FDI can also support competition in the
domestic input market.
FDI often helps employee to training in
the course of operating the new
businesses.
Profits generated by FDI share
to
corporate tax revenues in the host
country.