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Chapter 15 Multinationals and Migration. a. Multinationals. Link to syllabus. FDI – Foreign Direct Investment (p. 345).

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Chapter 15 multinationals and migration
Chapter 15 Multinationals and Migration

a. Multinationals

Link to syllabus

Fdi foreign direct investment p 345
FDI – Foreign Direct Investment (p. 345)

  • Flow definition: Flow of funding provided by investors (usually firms) to establish or acquire foreign companies or to expand or finance existing foreign companies that the investors own.

  • Key is sufficient ownership to control or influence the management of the foreign company.

  • Stock definition: Total value of existing funding (equity and debt) of foreign companies that has been provided by investors that own these foreign companies.

Multinational (or Transnational) Enterprise (or Corporation)

A firm that owns and controls operations in more than one country

Portfolio vs. Direct Investment

Why do mnes exist pp 349 50
Why do MNEs Exist? (pp. 349-50)

  • First, acknowledge that there are inherent disadvantages of operating a foreign affiliate competing against local firms.

  • Firm-specific advantages of the MNE, especially intangible assets. (a.k.a. organizational advantages).

  • Location factors based on resource costs and availability, customer demand, government policies, and other considerations.

  • Internalization advantages in using these assets.

  • Oligopolistic rivalry that uses FDI in the firms’ strategies for competing.

Sometimes referred to as international industrial organization

Major proponent of this perspective is John Dunning – ‘eclectic theory.’

and the OLI theory.

Implications of the dunning oli model
Implications of the Dunning/OLI Model

Foreign direct investment is often a ‘good thing’ – although we must

remember that it will have effects on income distribution, as well as

on output and employment.

There are several important examples when FDI does not increase

national welfare, such as when it is attracted by tariffs or subsidies,

or political power.

FDI will probably be associated with higher profits, import and/or

export propensities, higher wages, more capital intensity.

One should view FDI as part of a dynamic world (product cycle)

FDI will vary by productive sector

OECD countries have lots of both IFDI and OFDI

For many countries, FI and FDI have greatly different values.

Oli in turkey
OLI in Turkey

Journal of Management Development Vol. 27, #7. 2008

Exporting jobs and sales
Exporting Jobs and Sales

More sales from US subsidiaries overseas, than from US firms in the USA.

Source: NYT April 19, 2004

Outsourcing by toyota
Outsourcing by Toyota

Source: NYT Oct 21, 2003

Narula dunning investment development path
Narula/Dunning Investment Development Path

Source: UNCTAD: World Investment Report, 2006

Fdi outward stock by region selected years billions of current us dollars
FDI outward stock, by Region. Selected years (billions of current US dollars)

Source seems to be WIR

Inward fdi stocks in the us by state
Inward FDI Stocks in the US, by State. current US dollars)

Thompson: International EconomicsExample 8.13. Page 294

Japan outward fi gdp
Japan: Outward FI/GDP current US dollars)

Example 8 6 fdi between us and japan page 281
Example 8.6 FDI between US and Japan. Page 281 current US dollars)

Year is probably around 1990

Source: Thompson: International Economics

Fi from oil exporters
FI from Oil Exporters current US dollars)

US 2006 Outward FI $1,062b

Outward FDI $235b

Source: NYT November 28, 2007

China nyt nov 24 2002
China: NYT Nov. 24, 2002 current US dollars)

Figure 7 1 eu fdi inflows 1984 98 page 148
Figure 7.1 EU FDI Inflows, 1984-98 page 148 current US dollars)

Hansen: European Integration

Table 7 4 intra eu fdi flows page 152
Table 7.4 Intra-EU FDI Flows. Page 152 current US dollars)

Hansen: European Integration

Figure 7 2 eu cross border m a in manufacturing page 149
Figure 7.2 EU Cross-border M&A in Manufacturing. Page 149 current US dollars)

Hansen: European Integration

Table 7 3 share of firms main motives for m a page 191
Table 7.3 Share of firms’ main motives for M&A Page 191 current US dollars)

Hansen: European Integration

Figure 7 3 share of intra eu fdi by sectors p 154
Figure 7.3 Share of Intra-EU FDI, by Sectors. P. 154 current US dollars)

Hansen: European Integration

Table 7 6 intra eu fdi flows of france page 156
Table 7.6 Intra-EU FDI Flows of France. Page 156 155

Hansen: European Integration

Figures 7 4 and 7 5 fdi net outflows from france inside the eu page 157
Figures 7.4 and 7.5. FDI Net Outflows from France inside the EU. Page 157

Hansen: European Integration

Figure 7 6 trade and fdi between france and eu 1998 p 159
Figure 7.6 Trade and FDI between France and EU, 1998. P 159 the EU. Page 157

Hansen: European Integration

Us fi gdp 1900 2000
US FI/GDP, 1900-2000 the EU. Page 157

World ifdi ofdi
World IFDI, OFDI the EU. Page 157

Top tncs from ldcs
Top TNCs from LDCs the EU. Page 157

Us net international position 1988 2005
US: Net International Position, 1988-2005 the EU. Page 157

Source: US DoC.

Link to iip data
Link to IIP data the EU. Page 157

Link to intinv05_t2.xls

Fdi inward stock selected years billions of current us dollars
FDI inward stock, selected years (billions of current US dollars)

Source: World Investment Report