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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.

Thompson: International EconomicsExample 8.13. Page 294

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

Year is probably around 1990

Source: Thompson: International Economics

fi from oil exporters
FI from Oil Exporters

US 2006 Outward FI $1,062b

Outward FDI $235b

Source: NYT November 28, 2007

table 7 4 intra eu fdi flows page 152
Table 7.4 Intra-EU FDI Flows. Page 152

Hansen: European Integration

table 7 5 share of intra eu fdi in mfg by technology page 155
Table 7.5 Share of Intra-EU FDI in MFG., by Technology. Page 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

us net international position 1988 2005
US: Net International Position, 1988-2005

Source: US DoC.

link to iip data
Link to IIP data

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