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Multinationals and the Location of Production

Multinationals and the Location of Production. Project Link United Nations July 14, 2014. Resource Flows to Developing Countries. Netting Out M&A Activity: Developing Country FDI has Grown Steadily. Winners and Losers from FDI Inflows in 2001. Who Received FDI in 2001?.

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Multinationals and the Location of Production

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  1. Multinationals and the Location of Production Project Link United Nations July 14, 2014

  2. Resource Flows to Developing Countries

  3. Netting Out M&A Activity:Developing Country FDI has Grown Steadily

  4. Winners and Losers from FDI Inflows in 2001

  5. Who Received FDI in 2001?

  6. Corporate Priorities: FDI in 2002 Most Favoured Destinations as a Percentage of MNE Responses

  7. Determinants of FDI, Location of Production and Trade • Political Expropriation • Contracting Environment

  8. 1. Breaking Down the Value Chain

  9. FDI and the Propagation of International Shocks

  10. FDI and Deflation

  11. 2. Asset Specificity and Relationship-Specific Investments Why is FDI so intense in just a handful of industries?

  12. 3. Knowledge Creation and Control Who creates Knowledge? Who Controls Knowledge?

  13. Sony’s Flat-Screen Cathode Ray Tube (CRT)

  14. FDI, Trade and IPR Regimes

  15. 4. Rent-Seeking Institutions • Political Expropriations • Legal / Contractual Environment

  16. FDI, Trade and IPR Regimes

  17. Putting a Lid on Rent-Seeking Behaviour Long-Run Growth (1972-2000) (Skilled Sector Tariffs) – (Unskilled Sector Tariffs)

  18. Determinants of FDI, Location of Production and Trade • Political Expropriation • Contracting Environment

  19. Virtually all of international trade in manufactures and services is done via multinationals. 1/3 is done within a firm, 1/3 is done at arm’s length in which both sides are MNCs and 1/3 is done at arm’s length in which one side is an MNC. • In short, the international location of production is determined by FDI.

  20. In the 1990s FDI grew dramatically. The usual explanation is that it was driven by (in order of importance) • technological forces related to the ability to direct a firm from a distance (ICT), • the M&A wave which reflected changing managerial views about economies of scope versus core competence, • FDI liberalization in developing countries, • falling transportation costs, and • trade liberalization.

  21. After growing since 1991, FDI contracted substantially in 2001. • Causes (in order of importance): • Bursting of the bubble with its implications for equity finances, especially M&A activity and the consolidation of core competences. • Slowing of economic activity in the major industrial economies. • Sept. 11, war, deflation, SARS

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