REPUBLIC OF THE PHILIPPINES

POLYTECHNIC UNIVERSITY OF THE PHILIPPINES

COLLEGE OF BUSINESS ADMINISTRATION
DEPARTMENT OF HUMAN RESOURCE DEVELOPMENT MANAGEMENT
STA. MESA, MANILA

Introduction to International
Management

Submitted by: Group 1

Buan, Faye Clarize M.
Bernadet, Marinella Mae E.
Bunagan, April C.
Caringal, Benelyn
Florendo, Shaira Daphnee Y.
Leaño, Patricia Nicole B.
Salvador, Jamie-Ann S.

Submitted to:
Professor Marilou B. Mondana
 International Management requires knowledge and skills above and beyond normal
business expertise such as familiarity with the business regulations of the nations in which
the organization operates, understanding of local customs and laws, and the capability to
conduct transactions that may involve multiple currencies.

Business has entered the era of the one-world market. Increasingly, companies are going
overseas to attain sales and profits unavailable to them in their home markets. So as the
increasing internationalization of business requires managers to have a global business
perspective.

A. Introduction: International Business in an Age of Globalization

Globalization is the acceleration and extension of interdependence of economic and

business activities across national boundaries. One of the main arguments against
globalization is that it confers benefits on rich nations at the expense of poor countries. The
fourteen nations that score highest on globalization are all developed economies, while the
bottom half of the list is occupied by developing and emerging economies. This does not
mean that globalization brings no value to the developing world. In contrast, countries that
fail to integrate into the global economy face the prospect of falling further behind.

To the consumer, globalization means more choices, generally lower prices and an
increasingly blurred national identity for products and services. It is also important to
realize that many of the manifestations of globalization in wealthy nations end up helping
poorer economies.

Globalization and International Business:

International Business refers to business activities that involve the transfer of resources,
goods, services, knowledge, skills, or information across national boundaries. International
Business also called as cross-border business.

Firm activities and exchanges that involve the crossing of national boundaries are called
international transactions. International transactions are manifested mainly in international
trade and investment. International trade occurs when a company exports goods or services
to buyers (importers) in another country. International investment occurs when the
company invests resources in business activities outside its home country.
Any firm, regardless of size, that is engaged in international business is defined as an
international firm. A firm that has directly invested abroad and has at least one working
affiliate in a foreign country (e.g., a factory, a branch office) over which it maintains effective
control is defined as a multinational enterprise, or MNE.

International versus Domestic Business:

 Traditionally, international business has been the outgrowth of domestic business. In
fact, most major corporations that are active in today’s international scene started their
operations in the domestic market.

Firms are called born global, global startups, or international new ventures (INVs) if
the companies engage in international activities without having a home base in the
traditional sense.

Environmentally, the diversity that exists between countries with regard to cultures,
social customs, business practices, laws, government regulations, and political stability is
among the many reasons for the complexity of international business. Therefore,
international business is usually riskier than domestic business, although, on the whole,
presence in multiple international markets provides a measure of diversification, which
mitigates risk. Variations in inflation, currency, taxation, and interest rates among different
nations have a significant impact on the profitability of an international firm. For a firm that
is borrowing and investing in a foreign country, higher interest rates, tax rates, and inflation
rates mean higher cost of operation and lower profitability. At the same time, for a firm that
is depositing money in a foreign bank, higher interest rates mean a higher return.

Why Do Firms Expand Internationally?

Motivations for Conducting International Business:

1. Market motives - can be offensive or defensive. An offensive motive is to seize market

opportunities in foreign countries through trade or investment. A defensive motive is to
protect and hold a firm’s market power or competitive position in the face of threats from
domestic rivalry or changes in government policies.
2. Economic motives - apply when firms expand internationally to increase their return
through higher revenues or lower costs.
3. Strategic motives - lead firms to participate in international business when they seek, for
instance, to capitalize on distinctive resources or capabilities developed at home.

Concepts and Theories in International Business:

Trade Theories

International Trade Theories are simply different theories to explain international

trade. Trade is the concept of exchanging goods and services between two people or entities.
International trade is then the concept of this exchange between people or entities in two
different countries.
 7 Types of Trade Theories

1. Mercantilism:

The oldest of all trade theories, Mercantilism, dates back to 1630. At that time, Thomas
Mun stated that the economic strength of any country depends on the amounts of silver and
gold holdings. Greater are the holdings, more economically independent a country is.

Furthermore, the idea of favoring greater exports and promoting efforts to minimize
imports also belongs to the same theory. The thinking behind this concept is evident since
you pay for the imports from the pay that you get from exports. So, if a country has a lot to
pay for the imported products then it will get from exported products, its economy will get
inclined towards declination. The objective of each country was to have a trade surplus and
to avoid a trade deficit.

Although mercantilism is one of the oldest trade theories, it remains part of modern
thinking. Countries such as Japan, China, Singapore, Taiwan, and even Germany still favor
exports and discourage imports through a form of neo-mercantilism in which the countries
promote a combination of protectionist policies and restrictions and domestic-industry
subsidies.

2. Absolute Advantage:

In 1776, Adam Smith, a renowned financial expert of the time being, proposed the theory
that the manufacturing a product with high efficiency as compared to any other country on
the globe is highly advantageous.

Smith offered a new trade theory called absolute advantage, which focused on the ability
of a country to produce a good more efficiently than another nation. Smith reasoned that
trade between countries shouldn’t be regulated or restricted by government policy or
intervention.
 Smith’s theory reasoned that with increased efficiencies, people in both countries would
benefit and trade should be encouraged. His theory stated that a nation’s wealth shouldn’t
be judged by how much gold and silver it had but rather by the living standards of its people.

3. Comparative Advantage:

David Ricardo, an English economist, introduced the theory of comparative advantage in

1817. The country with the absolute advantage in producing both products would still
produce both products, but less of the one they would trade for, allowing them to essentially
allocate more resources to producing the product that they’re comparatively most efficient
at producing.

Comparative advantage occurs when a country cannot produce a product more

efficiently than the other country; however, it can produce that product better and more
efficiently than it does other goods. The difference between these two theories is subtle.
Comparative advantage focuses on the relative productivity differences, whereas absolute
advantage looks at the absolute productivity.

4. Heckscher-Ohlin Theory (Factor Proportions Theory):

In the early 1900s, two Swedish economists, Eli Heckscher and Bertil Ohlin, focused their
attention on how a country could gain comparative advantage by producing products that
utilized factors that were in abundance in the country. Their theory is based on a country’s
production factors—land, labor, and capital, which provide the funds for investment in
plants and equipment. They determined that the cost of any factor or resource was a function
of supply and demand. Factors that were in great supply relative to demand would be
cheaper; factors in great demand relative to supply would be more expensive.

Their theory, also called the factor proportions theory, stated that countries would
produce and export goods that required resources or factors that were in great supply and,
therefore, cheaper production factors. In contrast, countries would import goods that
required resources that were in short supply, but higher demand.

5. Product Life Cycle Theory:

Raymond Vernon, a Harvard Business School professor, developed the product life cycle
theory in the 1960s. The theory, originating in the field of marketing, stated that a product
life cycle has three distinct stages: (1) new product, (2) maturing product, and (3)
standardized product. The theory assumed that production of the new product will occur
completely in the home country of its innovation. In the 1960s this was a useful theory to
explain the manufacturing success of the United States. US manufacturing was the globally
dominant producer in many industries after World War II.
 It has also been used to describe how the personal computer (PC) went through its
product cycle. The PC was a new product in the 1970s and developed into a mature product
during the 1980s and 1990s. Today, the PC is in the standardized product stage, and the
majority of manufacturing and production process is done in low-cost countries in Asia and
Mexico.

The product life cycle theory has been less able to explain current trade patterns where
innovation and manufacturing occur around the world. For example, global companies even
conduct research and development in developing markets where highly skilled labor and
facilities are usually cheaper. Even though research and development is typically associated
with the first or new product stage and therefore completed in the home country, these
developing or emerging-market countries, such as India and China, offer both highly skilled
labor and new research facilities at a substantial cost advantage for global firms.

6. New Trade Theory:

In 1970′s, Paul Krughman developed the New Trade Theory – Via the achievement of
economies of scale, trade can increase the variety of goods available to consumers and
decrease the average cost of those goods. Further, the ability to capture economies of scale
before anyone else is an important first-mover advantage. Nations may benefit from trade
even when they do not differ in resource endowments or technology.

Example – If two nations both want sports cars and minivans, but neither can produce
them at a low enough price within their own national markets, trade can allow each to focus
on one product, allowing for the achievement of economies of scale that will increase the
variety of products in both countries at low enough prices.

New trade theory is not at odds with Comparative Advantage, since it identifies first
mover advantage as an important source of comparative advantage

7. Porter’s National Competitive Advantage Theory:

In the continuing evolution of international trade theories, Michael Porter of Harvard

Business School developed a new model to explain national competitive advantage in 1990.
Porter’s theory stated that a nation’s competitiveness in an industry depends on the capacity
of the industry to innovate and upgrade. His theory focused on explaining why some nations
are more competitive in certain industries. To explain his theory, Porter identified four
determinants that he linked together. The four determinants are:

(1) Local market resources and capabilities, Porter recognized the value of the factor
proportions theory, which considers a nation’s cuts a country will import or export. Porter
added to these basic factors a new list resources as key factors in determining what proof
advanced factors, which he defined as skilled labor, investments in education, technology,
and infrastructure.
(2) Local market demand conditions, Porter believed that a sophisticated home market is
critical to ensuring ongoing innovation, thereby creating a sustainable competitive
advantage. Companies whose domestic markets are sophisticated, trendsetting, and
demanding forces continuous innovation and the development of new products and
technologies.

(3) Local suppliers and complementary industries, to remain competitive, large global firms
benefit from having strong, efficient supporting and related industries to provide the inputs
required by the industry.

(4) Local firm characteristics, Local firm characteristics include firm strategy, industry
structure, and industry rivalry. Local strategy affects a firm’s competitiveness. A healthy level
of rivalry between local firms will spur innovation and competitiveness.

Porter’s theory, along with the other modern, firm-based theories, offers an
interesting interpretation of international trade trends. Nevertheless, they remain relatively
new and minimally tested theories.

International Trade Patterns

Exploring the volume international trade and world output provides useful insight
into the international trade environment. However, it does not tell us who trades with whom.
For instance, it does not reveal whether trade occurs primarily between the world’s richest
nations or whether there is significant trade activity involving poorer nations.
Customs agencies in most countries record the destination of exports, the source of
imports, and the physical quantities and values of goods crossing their borders. Although
this type of data is revealing, it is sometimes misleading. For example, governments
sometimes deliberately distort the reporting of trade in underground economy (black
markets) can distort the real picture of trade between nations rather well.
Large ocean-going cargo vessels are needed to support these patterns in international
trade and deliver merchandise from one shore to another. In fact, Greek and Japanese
merchant ships own over 30 percent of the world’s total capacity of merchant ships. As a
whole, the developing countries share the total is rising and today stands at nearly 20
percent. (Figure 1)

Who Trades with Whom?

Not surprisingly, a broad pattern of merchandise trade among the world’s nations
tends to persist. Trade between the world’s high-income economies accounts for roughly 60
percent of total world merchandise trade. Two-way trade between high-income countries
and low- and middle-income nations account for about 34 percent of world merchandise
trade. Meanwhile, merchandise trade between low- and middle-income nations account for
only about 6 percent of total world trade. These figures reveal the low purchasing power of
the world’s poorest nations and indicate their general lack of economic development.
 The figure shows trade data for the major regions of the world economy. The number
representing intraregional exports for Western Europe immediately stand out. This number
tells us that nearly $1.8 trillion (over 67%) of Western Europe’s export are destined for all
over exports in Asia and 40% of export in North America. These data underscore the
rationale behind and results of efforts toward European regional integration called the
European Union.
Data in the table also reveal why headlines in the US often campaign that Asia’s
markets are not open to goods from North America. The value of North American exports
$204 billion, is only slightly more than half the value of Asian exports to North America, $394
billion. But economies across Asia develop, this figure should adjust to reflect their greater
purchasing power. Some economies call this century the “Pacific Century” referring to the
expected future growth of Asian economies and the resulting shift in trade flows from the
Atlantic Ocean to the pacific. As these nations economies grow, it will become increasingly
important for managers to fully understand how to do business in Asia.

NORTH LATIN WESTERN EUROPE AFRICA MIDDLE ASIA WORLD

AMERICA AMERICA EUROPE EAST

404 153 180 8 12 20 219 997

218 59 51 4 5 4 29 378
298 57 2,130 214 80 83 248 3145
19 7 228 98 4 9 30 401
33 4 84 1 18 3 31 173
46 3 48 2 10 22 145 299
428 41 319 32 31 56 949 1901
1445 324 3,041 360 161 198 1651 7294

It shows trade data for major regions in world economy. The number representing
intraregional exports in Western Europe, immediately stands out. This number tells us that
nearly $1.8 trillion (over 67%) of Western Europe's exports are destined for other nations
in Western Europe. In contrast, intraregional exports account 49% of all exports of Asia and
40% of North America. This underscore rationale behind, the results of, efforts toward
European regional integration called European Union.

Data in the table also reveal why headlines in United States often complain that Asia's
Market are not open to goods from North America. The value of North American exports to
Asia, $204 billion, is only slightly half of the value of Asians exports to North America, $394
billion. But as economy across Asia develop, this figure should adjust to reflect their greater
purchasing power. Some economists called this century the 'Pacific Century' referring to the
future expected growth of Asia and resulting shift trade flows from Atlantic Ocean to Pacific.
As these nations economies grow, it will become increasingly important to the managers to
fully understand how to do business in Asia.
 TRADE BARRIERS
International trade increases the number of goods that domestic consumers can choose
from, decreases the cost of those goods through increased competition, and allows domestic
industries to ship their products abroad. While all of these effects seem beneficial, free trade isn't
widely accepted as completely beneficial to all parties.

What is Tariff?
Tariff is a government tax levied on a product as it enters or leaves the country. Tariffs
add to the cost of imported products and therefore tend to lower the quantity sold of the products
levied with a tariff.
These taxes levied on imported goods primarily for the purpose of raising their selling
price in the importing nation’s market to reduce competition for domestic producers. A few
smaller nations also use them to raise revenue on both imports and exports. Export of
commodities such as coffee and copper are commonly taxed in the developing nations.

Who collects Tariff?

Tariffs are paid to the customs authority of the country imposing the tariff. Tariffs on
imports coming into the United States, for example, are collected by Customs and Border
Protection, acting on behalf of the Commerce Department. In the U.K., its HM Revenue &
Customs (HMRC) that collects the money. In the Philippines, the Bureau of Customs is the
delegated branch of the government to collect money.

What are the categories of tariff?

We can classify tariffs into three categories according to the country that levies the tariff.
First, a tariff levied by the government of a country that is exporting a product is called an
Export Tariff. Second, a tariff levied by the government of a country that a product is passing
through on its way to its final destination is called Transit Tariff. Lastly, a tariff levied by the
government in a country that is importing a product is called an Import Tariff.
We can further breakdown the import tariff into three subcategories based on the manner in
which it is calculated.
 An Ad Valorem Tariff is a Latin phrase meaning "according to value”. All ad valorem
taxes are levied based on the determined value of the item being taxed.
For example, the U.S. Tariff Schedule states that flavouring extracts and fruit flavours not
containing alcohol are subject to 6 percent ad valorem duty. Therefore, when a shipment
of flavouring extract invoiced at $10,000 arrives in the United States, the importer is
required to pay $600 to U.S. Customs before taking possession of the goods.
  A Specific Tariff is levied as a specific fee for each unit (measured by number, weight,
etc.)
For example, a country could levy a $15 tariff on each pair of shoes imported, but levy a
$300 tariff on each computer imported.

 Compound Tariff is levied on an imported product and calculated partly as a percentage

of its stated price and partly as a specific fee for each unit.

Why countries levy Tariff?

 Protecting Domestic Employment - The levying of tariffs is often highly politicized. The
possibility of increased competition from imported goods can threaten domestic
industries.
 Protecting Consumers - A government may levy a tariff on products that it feels could
endanger its population.
 Infant Industries - The government of a developing economy will levy tariffs on
imported goods in industries in which it wants to foster growth.
 National Security - Barriers are also employed by developed countries to protect certain
industries that are deemed strategically important, such as those supporting national
security. Defense industries are often viewed as vital to state interests, and often enjoy
significant levels of protection.
 Retaliation - Countries may also set tariffs as a retaliation technique, if they think that a
trading partner has not played by the rules.

NONTARIFF BARRIERS
Nontariff Barriers (NTBs) arise from different measures taken by governments and
authorities in the form of government laws, regulations, policies, conditions, restrictions or specific
requirements, and private-sector business practices, or prohibitions that protect the domestic
industries from foreign competition. It is a way to restrict trade using trade barriers in a form other
than a tariff.
Non-tariff barriers, do not affect the price of the imported goods, but only the quantity of
imports. By limiting the quantity of an imported product, its price would increase in the market and
thus decrease its sales. Some of the important non-tariff barriers are as follows:
1. Quota > A restriction on the amount (measured in units or weight) of a good that can enter or
leave a country during a certain period of time. This is divided into the following categories:
a. Tariff/Customs Quota: Certain specified quantity of imports is allowed at duty free or at a
reduced rate of import duty. Additional imports beyond the specified quantity are permitted
only at increased rate of duty. A tariff quota, therefore, combines the features of a tariff and
an import quota.
 b. Unilateral Quota: The total import quantity is fixed without prior consultations with the
exporting countries.
c. Bilateral Quota: In this case, quotas are fixed after negotiations between the quota fixing
importing country and the exporting country.
d. Multilateral Quota: A group of countries can come together and fix quotas for exports as well
as imports for each country.

2. License > A license is granted to a business by the government and allows the business to import
a certain type of good into the country. For example, there could be a restriction on imported
cheese, and licenses would be granted to certain companies allowing them to act as importers. This
creates a restriction on competition and increases prices faced by consumers.

3. Local Content Requirements > Governments impose domestic content requirements to boost
domestic production. Instead of placing a quota on the number of goods that can be imported, the
government can require that a certain percentage of a good be made domestically. A minimum level
of local content is sometimes a requirement under trade laws when giving foreign companies the
right to manufacture in a particular place.

4. Voluntary Export Restraints (VER) > A self-imposed limitation on the amount of a product that
one country is permitted to export to another. Imposing a voluntary export restraint (VER) will
often be a nation's official response to a request made by the country being exported to for
protection for its domestic businesses against such foreign competition. This is typically done to
prevent the imposition of trade tariffs. Also called export restraint agreement.

5. Embargoes > A complete ban on trade (imports and exports) in one or more products with a
particular country is called an embargo. An embargo may be placed on one or a few goods or it may
completely ban trade in all goods. It is the most restrictive nontariff trade barrier available, and is
typically applied to accomplish political goals.

6. State Trading > In some countries like India, certain items are imported or exported only through
canalising agencies like MMTC (minerals and metals trading corporation of India). Individual
importers or exporters are not allowed to import or export canalised items directly on their own.

7. Product Standards > Most developed countries impose product standards for imported items. If
the imported items do not conform to established standards, the imports are not allowed.

What is 'Foreign Direct Investment - FDI'

- Is an investment made by a firm or individual in one country into business interests located in
another country? Generally, FDI takes place when an investor establishes foreign business
operations or acquires foreign business assets, including establishing ownership or controlling
interest in a foreign company. Foreign direct investments are distinguished from portfolio
investments in which an investor merely purchases equities of foreign-based companies.
The various types of Foreign Direct Investment includes:

 Horizontal FDI: It is the investment done by a company or organization which practices all
the tasks and activities done at the investing company, back at its own country of operation.
Therefore, basically such investors are from the same industry where investments are done
but operating in two different countries. For e.g., a car manufacture in Australia invests in a
car manufacturing company of India.

 Vertical FDI: The industry of the investor and the company where investments are done are
related to each other. This type of FDI is further classified as:

 Forward Vertical FDI: In such investments, foreign investments are done in organizations
which can take the products forward towards the customers. For e.g., a car manufacturing
company in Australia invests in a wholesale Car Dealer company in India.

 Backward Vertical FDI: In such investments, foreign investments are done in an

organization which is involved in sourcing of products for the particular industry. For e.g.,
the car manufacturer of Australia invests in a tire manufacturing plant in India.

 Conglomerate FDI: Such investments are done to gain control in unrelated business
segments and industries in a foreign land. For e.g., the car manufacturer of Australia invests
in a consumer durable goods manufacturer in India. Here the investing company ideally
manages two challenges, first being gaining operational control in a foreign land, and the
second being starting operations in a new industry segment.

Multinational Enterprises – Benefits of FDI

The possible benefits of a multinational investing in a country may include:

Improving the balance of payments - inward investment will usually help a country's balance of
payments situation. The investment itself will be a direct flow of capital into the country and the
investment is also likely to result in import substitution and export promotion. Export promotion
comes due to the multinational using their production facility as a basis for exporting, while import
substitution means that products previously imported may now be bought domestically.

Providing employment - FDI will usually result in employment benefits for the host country as most
employees will be locally recruited. These benefits may be relatively greater given that
governments will usually try to attract firms to areas where there is relatively high unemployment
or a good labour supply.

Source of tax revenue - profits of multinationals will be subject to local taxes in most cases, which
will provide a valuable source of revenue for the domestic government.

Technology transfer - multinationals will bring with them technology and production methods that
are probably new to the host country and a lot can therefore be learnt from these techniques.
Workers will be trained to use the new technology and production techniques and domestic firms
will see the benefits of the new technology. This process is known as technology transfer.
Increasing choice - if the multinational manufactures for domestic markets as well as for export,
then the local population will gain form a wider choice of goods and services and at a price possibly
lower than imported substitutes.

National reputation - the presence of one multinational may improve the reputation of the host
country and other large corporations may follow suite and locate as well.

THEORIES AND PERSPECTIVES ON FDI

FOREIGN DIRECT INVESTMENT THEORIES ON MICRO LEVEL

 Existence of Firm Specific Advantages (Stephen Hymer)

This has implications for FDI insofar as why would a foreign company inwardly invest rather
than supply the products and services? Stephen Hymer argued that a direct foreign investor should
possess some kind of proprietary or monopolistic advantage not available to local firms. These
advantages must be economies of scale, superior technology, or superior knowledge in marketing,
management, or finance. Therefore Foreign direct investment will and has taken place place
because of the product and factor market imperfections. The firms would of course have perfected
these advantages in their own home market first so that there would be little additional cost to
implementing these advantages abroad.

 The Internalisation Theory (Peter Buckley and Mark Casson)

Internalisation theory focuses on imperfections in intermediate product markets.[2] Two main

kinds of intermediate product are distinguished: knowledge flows linking research and
development (R&D) to production, and flows of components and raw materials from an upstream
production facility to a downstream one. Most applications of the theory focus on knowledge
flow.[3] Proprietary knowledge is easier to appropriate when intellectual property rights such as
patents and trademarks are weak. Even with strong protections firms protect their knowledge
through secrecy. Instead of licensing their knowledge to independent local producers, firms exploit
it themselves in their own production facilities. In effect, they internalise the market in knowledge
within the firm. The theory claims the internalization leads to larger, more multinational
enterprises, because knowledge is a public good.[4] Development of a new technology is
concentrated within the firm and the knowledge then transferred to other facilities.

 Eclectic Theory (John Dunning)

The eclectic paradigm is a theory in economics and is also known as the OLI-Model or OLI-
Framework, standing for Ownership, Location and Internalization. It is a further development of the
internalization theory and published by John H. Dunning in 1979.
  Ownership advantages. Specific advantages refer to the competitive advantages of the
enterprises seeking to engage in Foreign Direct Investment (FDI). The greater the
competitive advantages of the investing firms, the more they are likely to engage in their
foreign production.

 Location advantages. Locational attractions refer to the alternative countries or regions, for
undertaking the value adding activities of multinational enterprises (MNEs). The more the
immobile, natural or created resources, which firms need to use jointly with their own
competitive advantages, favor a presence in a foreign location, the more firms will choose
to augment or exploit their O specific advantages by engaging in FDI.

 Internalization advantages. Firms may organize the creation and exploitation of their core
competencies. The greater the net benefits of internalizing cross-border intermediate
product markets, the more likely a firm will prefer to engage in foreign production itself
rather than license the right to do so.

• FDI THEORIES ON MACRO LEVEL

1. Capital Market Theory- Capital market has positive significant impact on our economy; FDI the
economy have significant impact on economic growth and that FDI enhances the capitalization of
Nigerian capital market. It was recommended that Government should help improve the
investment climate to attract higher FDI inflows which consequently will translate into higher gross
fixed capital formation, which in turn leads to greater economic growth.

• FDI Theory based on Exchange rates- exchange rates can affect acquisition of FDI as this
involves purchasing firm specific assets in the foreign currency that can generate returns in
another currency.

-. FDI theory based on exchange rate analyses the relationship of FDI flows and exchange rate
changes. The existing literature has conflicting issues, with some studies supporting the significant
relationship whilst others reject it.

• FDI Theory based on Economic Geography- with the earliest theoretical directions as regards
FDI location issues and extend our study to describing less debated theories, but of a particular
importance for this theme