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What are fdi theories?

5 Answer(s) Available
Answer # 1 #
  • Here are the different types of foreign investments. Horizontal FDI.
  • Vertical FDI. Vertical FDI is another type of foreign investment.
  • Conglomerate FDI.
  • Platform FDI.
Kamini Dhunna
Answer # 2 #

. Blomstrom, M., R. Lipsey and M. Zegan (1994): "What explains developing country growth?" NBER Working Paper No. 4132, National Bureau for Economic Research Cambridge, Massachusetts.

, Borensztein, E" J. De Gregorio, and J.W. Lee (1998): "How Does Foreign Direct Investment Affect Economic Growth?" in Journal of International Economics 45, p. 115-135.

, Buckley, P.J. and Casson, M.C. (1976): "The Future of the Multinational Enterprise", Homes & Meier: London.

, Caves, R.E. (1996): "Multinational Enterprise and Economic Analysis', 2nd ed. Cambridge: Cambridge University Press.

, Cushman, D.O. (1985): "Real Exchange Rate Risk, Expectations and the Level of Direct Investment '' in Review of Economics and Statistics, 67 (2), 297-308.

, Dunning, J. H. (1973): "The determinants of international production", Oxford Economic Papers 25.

, Dunning, J. H. (1980): "Toward an eclectic theory of international production: Some empirical tests" in Journal of International Business Studies issue 11.

, Dunning, J. H. (1988): "The Eclectic Paradigm of International Production: A restatement and some possible extensions", in Journal of International Business Studies issue 19 (Spring).

, Gorg, H., Greenaway D. (2002): "Much Ado About Nothing? Do Domestic Firms Really Benefit from Foreign Direct Investment?", Research Paper 2001/37

, Hanson, G. (2001): "Should Countries Promote Foreign Direct Investment?", G-24 Discussion Papers 9, United Nations Conference on Trade and Development

. Hennart J.F. (1982): "A theory of multinational enterprise". University of Michigan Press.

, Hirschman, A. O. (1958): "The Strategy of Economic Development", New Haven: Yale University Press.

, Hymer, S., 1976 (1960 dissertation): "The International Operations of Nation Finns: A Study of Foreign Direct Investment", Cambridge, MLT Press.

, Hosseini H. (2005): "An economic theory of FDI: A behavioural economics and historical approach". The Journal of Socio-Economics, 34,p 530-531.

, Kindleberger C.P. (1969): "American Business Abroad", The International Executive 11, p.11-12.

, Kojima, K, Osawa, T. (1984): "Micro and macro-economic models of foreign direct investment". Hitosubashi Journal of Economics.

, Lipsey R (2002), "Home and Host Country Effects of FDI", Lidingö, Sweden.

, Mundell, R A. (1957): "International Trade and Factor Mobility," American Economic Review, Vol. 47.

, Smarzynska, B (2002): "Spillovers from Foreign Direct Investment through Backward Linkages: Does Technology Gap Matter?"Mimeo, World Bank.

Prashant N
Answer # 3 #

From a macroeconomic point of view, FDI is a particular form of capital flows across borders, from countries of origin to host countries, which are found in the balance of payments. The variable of interest is: capital flows and stocks, revenues obtained from investments.

Jenica Onyx
House Manager
Answer # 4 #

Adani Enterprises Share Price

Reliance Share Price

ITC Share Price

HDFC Bank Share Price

Infosys Share Price

Adani Ports Share Price

TCS Share Price

Sherist Ford
Answer # 5 #

Foreign direct investment (FDI) theories are means to understand the environment of international investment in different countries.

The four main theories of FDI are mentioned below:

The monopoly theory of advantage states that the investing firm possesses a relative monopolistic advantage abroad against the competitive local firms.

This theory talks about a horizontal foreign investment where a company makes an investment in a foreign country in a similar business prevailing in the foreign country.

According to this theory, when a firm goes through this theory enjoys a monopolistic advantage on two counts – economies of scale (cost reduction technique) and superior knowledge and advanced technology. It refers to all intangible skills-intellectual capital plus advanced technology which permits the firm to create unique product differentiation.

Empirically, it suggests horizontal foreign direct investments of the US firms’ knowledge in technology-intensive industries such as petroleum referring, pharmaceuticals, chemicals, and transport equipment. It was also observed in the case of US firms in high-level marketing skill-oriented industries such as cosmetics and fast food abroad.

The oligopoly theory of advantage theory of FDI explains vertical foreign investment. This means a company invests in a foreign country other than the business prevailing in that country.

Through vertical direct foreign investment, they tend to capture and enlarge market share in the global market.

The oligopolistic big firms tend to dominate in the global market on account of entry barriers such as the big firms intend to retain their monopoly power by sustaining the entry barriers. They do not want new competitors to enter by allowing the market vacuum.

This theory explains the defensive investment behavior of a multinational firm. For this reason, petroleum companies tend to land invested in crude oil refineries as well as marketing outlets.

The oligopoly multi-national firm can internalize external economies of scale by advantage of backward integration to forward integration.

Raymond Vernon’s IPLC theory explains both international trade and foreign direct investment. It explains that FDI is a natural stage in the life of a product.

It further explains a firm shift from exporting to foreign direct investment.

Initially, a firm that innovates a product and produces at home enjoys its monopolistic advantage and starts the export market, thus, specializing and exporting. This theory says FDI occurs when the product life cycle moves to the third and fourth stages i.e. maturity and decline stages.

The firm may tend to invest abroad and export from there to retain its monopoly power. The rivals from the home country may also follow to invest in the same foreign country’s oligopolistic market explaining both trade and FDI.

This theory is Propounded by John Dunning (1988), is a holistic, analytic approach for FDI and organizational issues of the MNCs relating to foreign production.

Eclectic paradigm considers the significance of three variables.

Sometimes the eclectic theory of international production is also referred to as the OLI Model as there are three specific advantages to foreign investment: ownership, location, and internalization.

Bradshaw Unidrim