Chapter 6 Investing Abroad Directly Summary

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Chapter 6 Investing Abroad Directly`

Foreign direct investment (FDI)
Putting money in activities that control and manage value-added activities in other countries Direct ,hands-on management of foreign operations.
An equity of 10% or more in a foreign-based enterprise.

Multinational enterprise (MNE)
Firms that engage in FDI

Foreign portfolio investment (FPI)
Investment in a portfolio of foreign securities such as stocks and bonds. Holding securities, such as stocks and bonds, of companies in countries outside one’s own but does not entail the active management of foreign assets Management control rights

Authority to appoint key managers and establish control mechanisms.

Horizontal FDI
A type of FDI in which a firm duplicates its home country-based activities at the same value chain stage in a host country. Producing the same products or offering the same services in a host country as firms do at home

Vertical FDI
A type of FDI in which a firm moves upstream or down stream at different value chain stages in a host country. Firm moves upstream or downstream in different value chain stages in a host country through FDI Upstream vertical FDI

A firm engages in an upstream stage of the value chain in a host country. Downstream vertical FDI
A firm engages in a downstream stage of the value chain in a host country.

FDI flow
The amount of FDI moving into a given period(usually a year)in a certain direction. FDI inflow
Inbound FDI moving into a country in a year.
FDI outflow
Outbound FDI moving out of a country in a year
FDI stock
Total accumulation

MNE versus non-MNE
Exporting, importing, licensing and franchising, outsourcing, or engaging in PFI. What sets MNEs apart from non-MNEs is FDI.

Why do firms become MNEs by engaging in FDI.
OLO advantages

❤Ownership advantage
An MNE’s possession and leveraging of certain valuable, rare, hard-to-imitate, and organizationally embedded assets overseas. 1.A product or a process...
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