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Chapter 15 Multinationals and Migration Link to syllabus a. Multinationals.

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Presentation on theme: "Chapter 15 Multinationals and Migration Link to syllabus a. Multinationals."— Presentation transcript:

1 Chapter 15 Multinationals and Migration Link to syllabus a. Multinationals

2 FDI – Foreign Direct Investment (p. 345) Flow definition: Flow of funding provided by investors (usually firms) to establish or acquire foreign companies or to expand or finance existing foreign companies that the investors own. Key is sufficient ownership to control or influence the management of the foreign company. Stock definition: Total value of existing funding (equity and debt) of foreign companies that has been provided by investors that own these foreign companies. Multinational (or Transnational) Enterprise (or Corporation) A firm that owns and controls operations in more than one country Portfolio vs. Direct Investment

3 Figure 15.1 p Major Stocks of (Outward) FDI, 2008

4 US International Investments/GDP Data source: US DoC

5 Why do MNEs Exist? (pp ) First, acknowledge that there are inherent disadvantages of operating a foreign affiliate competing against local firms. Firm-specific advantages of the MNE, especially intangible assets. (a.k.a. organizational advantages). Location factors based on resource costs and availability, customer demand, government policies, and other considerations. Internalization advantages in using these assets. Oligopolistic rivalry that uses FDI in the firms’ strategies for competing. Sometimes referred to as international industrial organization Major proponent of this perspective is John Dunning – ‘eclectic theory.’ and the OLI theory.

6 Implications of the Dunning/OLI Model Foreign direct investment is often a ‘good thing’ – although we must remember that it will have effects on income distribution, as well as on output and employment. There are several important examples when FDI does not increase national welfare, such as when it is attracted by tariffs or subsidies, or political power. FDI will probably be associated with higher profits, import and/or export propensities, higher wages, more capital intensity. One should view FDI as part of a dynamic world (product cycle) FDI will vary by productive sector OECD countries have lots of both IFDI and OFDI For many countries, FI and FDI have greatly different values.

7 Table illustrating transfer prices (Pugel, p. 356)

8 OLI in Turkey Journal of Management Development Vol. 27, #

9 Exporting Jobs and Sales More sales from US subsidiaries overseas, than from US firms in the USA. Source: NYT April 19, 2004

10 Outsourcing by Toyota Source: NYT Oct 21, 2003

11 Narula/Dunning Investment Development Path Source: UNCTAD: World Investment Report, 2006

12 Outward Foreign Investment, OECD Countries,

13 Outward FI/GDP, Twentieth Century

14 FDI/GDP World Inward91825North Africa Inward Outward91927 Outward113 Europe Inward112536West Africa Inward Outward Outward394 U.K. Inward213037Latin Amer Inward Outward Outward51013 Canada Inward192928West Asia Inward10 18 Outward Outward227 USA Inward71316China Inward5169 Outward71422 Outward123 Russia Inward-1213Korea Inward2710 Outward-812 Outward1510 India Inward1410Turkey Inward6710 Outward Source: World Investment Report, 2009

15 FDI outward stock, by Region. Selected years (billions of current US dollars) Source seems to be WIR

16 Accumulated Foreign Direct Investment into the US, 2001.

17 US. Direct Investment Abroad 2001

18 Inward FDI Stocks in the US, by State. Thompson: International Economics Example Page 294

19 Inward and Outward FDI/GDP,

20 Japan: Outward FI/GDP

21 Example 8.6 FDI between US and Japan. Page 281 Year is probably around 1990 Source: Thompson: International Economics

22 Canada: Accumulated Inward Investment/Total Capital Stock

23 Canada: Foreign Ownership Ratios, by Sector

24 Mexico: Foreign Ownership of Capital,

25 FI from Oil Exporters Source: NYT November 28, 2007 US 2006 Outward FI $1,062b Outward FDI $235b

26 China: NYT Nov. 24, 2002

27

28 Figure 7.1 EU FDI Inflows, page 148 Hansen: European Integration

29 Table 7.4 Intra-EU FDI Flows. Page 152 Hansen: European Integration

30 Figure 7.2 EU Cross-border M&A in Manufacturing. Page 149 Hansen: European Integration

31 Table 7.3 Share of firms’ main motives for M&A Page 191 Hansen: European Integration

32 Figure 7.3 Share of Intra-EU FDI, by Sectors. P. 154 Hansen: European Integration

33 Table 7.5 Share of Intra-EU FDI in MFG., by Technology. Page 155 Hansen: European Integration

34 Table 7.6 Intra-EU FDI Flows of France. Page 156 Hansen: European Integration

35 Figures 7.4 and 7.5. FDI Net Outflows from France inside the EU. Page 157 Hansen: European Integration

36 Figure 7.6 Trade and FDI between France and EU, P 159 Hansen: European Integration

37 US: Inward & Outward FDI Flows,

38 Narula/Dunning Investment Development Path

39 US FI/GDP,

40 World IFDI, OFDI

41 Top TNCs from LDCs

42 US: Net International Position, Source: US DoC.

43 Link to IIP data Link to intinv05_t2.xlsintinv05_t2.xls

44 FDI inward stock, selected years (billions of current US dollars) Source: World Investment Report


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