When a firm exports its products to a foreign country, foreign direct investment occurs.


What are the determinants of foreign direct investment?

The most significant determinants of FDI reported in existing literature are market size, openness, infrastructure, return on investment, real labor cost, human capital (HC), agglomeration, exchange rate, political risk, government incentives, etc.

Which of the following is a form of foreign direct investment?

Basic forms of FDI are investment made to develop a production or manufacturing plant from the ground up (“greenfield investments”), mergers and acquisitions, and joint ventures. Three components of FDI are usually identified: equity capital, reinvested earnings, and intracompany loans.

When a firm allows another enterprise to produce its products under license?

When a firm allows another enterprise to produce its products under license, the licensee bears the costs or risks. The attractiveness of exporting increases in comparison to FDI or licensing when products have a low value-to-weight ratio.

Which of the following involves the establishment of a new operation in a foreign country?

Greenfield investment involves the establishment of a new operation in a foreign country. The flow of foreign direct investment refers to the number of countries a firm is investing in at any given point in time.

What are the 3 types of foreign direct investment?

There are 3 types of FDI:

  • Horizontal FDI.
  • Vertical FDI.
  • Conglomerate FDI.

What is FDI explain with example?

Foreign direct investments (FDI) are investments made by one company into another located in another country. FDIs are actively utilized in open markets rather than closed markets for investors. … The Bureau of Economic Analysis continuously tracks FDIs into the U.S. Apple’s investment in China is an example of an FDI.

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What are the types of foreign investment?

What Are the Different Kinds of Foreign Investment? International investment or capital flows fall into four principal categories: commercial loans, official flows, foreign direct investment (FDI), and foreign portfolio investment (FPI).

What is FDI and its importance?

FDI stands for “Foreign Direct Investment”. … FDI plays an important role in the economic development of a country. The capital inflow of foreign investors allows strengthening infrastructure, increasing productivity and creating employment opportunities in India.

What is indirect foreign investment?

Foreign indirect investments involve corporations, financial institutions, and private investors buying stakes or positions in foreign companies that trade on a foreign stock exchange. … Indirect investments include not only equity instruments such as stocks, but also debt instruments such as bonds.

What are the five methods for entering foreign markets?

There are several market entry methods that can be used.

  • Exporting. Exporting is the direct sale of goods and / or services in another country. …
  • Licensing. Licensing allows another company in your target country to use your property. …
  • Franchising. …
  • Joint venture. …
  • Foreign direct investment. …
  • Wholly owned subsidiary. …
  • Piggybacking.

Which of the following is an advantage of acquisitions as a means of entering foreign markets?

Which of the following is an advantage of an acquisition as a means of entry into foreign markets? It gives firms access to valuable intangible assets along with a set of tangible assets. … enters a national market after several other foreign firms have already done so.

Can be best defined as the sharing of the costs and operations of a business in a foreign country with a local partner?

The sharing of the costs and operation of a business between a foreign company and a local partner is called a joint venture.

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What are the two main types of FDI?

Typically, there are two main types of FDI: horizontal and vertical FDI. Horizontal: a business expands its domestic operations to a foreign country. In this case, the business conducts the same activities but in a foreign country. For example, McDonald’s opening restaurants in Japan would be considered horizontal FDI.

Which of the following factors according to Porter’s National Diamond is most likely to give a country competitive advantage over another country?

Which of the following factors, according to Porter’s national Diamond, is most likely to give a country competitive advantage over another country? Skilled Labor. Porter argues that a nation’s firms gain competitive advantage if _____________________________.

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