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Multinationals and the Location of Production. Project Link United Nations January 1, 2020. 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 Project Link United Nations January 1, 2020
Netting Out M&A Activity:Developing Country FDI has Grown Steadily
Corporate Priorities: FDI in 2002 Most Favoured Destinations as a Percentage of MNE Responses
Determinants of FDI, Location of Production and Trade • Political Expropriation • Contracting Environment
2. Asset Specificity and Relationship-Specific Investments Why is FDI so intense in just a handful of industries?
3. Knowledge Creation and Control Who creates Knowledge? Who Controls Knowledge?
4. Rent-Seeking Institutions • Political Expropriations • Legal / Contractual Environment
Putting a Lid on Rent-Seeking Behaviour Long-Run Growth (1972-2000) (Skilled Sector Tariffs) – (Unskilled Sector Tariffs)
Determinants of FDI, Location of Production and Trade • Political Expropriation • Contracting Environment
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.
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.
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