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FOREIGN DIRECT INVESTMENT (FDI) & POLITICAL AND COUNTRY RISK ANALYSES

FOREIGN DIRECT INVESTMENT (FDI) & POLITICAL AND COUNTRY RISK ANALYSES

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Published by Gaurav Kumar

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Published by: Gaurav Kumar on Jan 28, 2010
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12/04/2012

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AJAFIN 6605-08
FOREIGN DIRECT INVESTMENT (FDI) &POLITICAL AND COUNTRY RISK ANALYSES
FDI is the acquisition of fixed plants andequipment abroad.
 
Outline:
3
Market Imperfections that Lead to FDI:
Market failure or imperfections in general.
Product and factor markets.
Financial markets.
1
 
 
FDI Theories:
Theory of Industrial Organization (IO)
Provides insights into how
firms behave in markets.
It offers some explanations on the generalcircumstances under which exporting, licensing, or local production will be the preferred alternatives for exploiting foreign markets
. 
The theory focuses on imperfect products and factor markets
.
 
2
 
According to this theory, MNC’s have intangiblecapital in the form of trademarks, patents, generalmarketing skills, and other organizational abilities.
Exporting:
will be preferred if MNCs' intangibleassets - trademarks, patents, marketing or organizational abilities - can be embodied in theform of "hard-to-copy" products or products withoutadaptation.
3

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