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FOREIGN DIRECT INVESTMENT THEORY AND STRATEGY

THE THEORY OF COMPARATIVE ADVANTAGE. Free tradePerfect competitionNo uncertaintyCostless informationNo government interference

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FOREIGN DIRECT INVESTMENT THEORY AND STRATEGY

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    1. FOREIGN DIRECT INVESTMENT THEORY AND STRATEGY FDI; Purchase of physical assets, such as plant & equipment, in a foreign country, to be managed by the parent corporation. FDI is in contradiction to foreign portfolio investment

    2. THE THEORY OF COMPARATIVE ADVANTAGE Free trade Perfect competition No uncertainty Costless information No government interference # An example of Comparative Advantage. Case Thailand and Brazil

    3. MARKET IMPERFECTIONS: A RATIONALE FOR THE EXISTENCE OF THE MULTINATIONAL FIRM Imperfections in the market products translate market opportunities for MNEs. Examples Global Outsourcing of Comparative Advantage in Intellectual Skills Why Do Firms Become Multinational? Market seekers Raw material seekers Production efficiency seekers Knowledge seekers Political safety seekers

    4. SUSTAINING AND TRANSFERRING COMPETITIVE ADVANTAGE Economic of Scale and Scope Managerial and Marketing Expertise Advanced Technology Financial Strength Differentiated Products Competitiveness of the Home market

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