230 likes | 244 Views
Explore the dynamics of FDI in the global market, its impact on economies, and the key factors influencing MNE strategies. Delve into the winners and losers of FDI inflows, reasons behind FDI growth, and the shifts in FDI patterns post-2001 crisis.
E N D
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