A Case Study Of German Fdi

With an estimated population of 80.1 million, Germany has the largest economy in Europe and one of the largest economies in the world. Located in northern central Europe, Germany shares borders with nine European countries. Berlin is the country’s capital and largest city geographically. Today Germany is divided into sixteen federated states, including Berlin. German is the official language of this country, and is one of the top ten most spoken languages in the world.

The OLI theory refers to ownership, location, and internationalization (Dunning, 2000). It is a basic theory proposed by John Dunning in an attempt to explain the incentives behind the MNEs going overseas (Dunning, 1993), organizational forms of MNEs, the MNE’s location choices, and the decision choice that lay between FDI and its alternatives like international licensing, trade and outsourcing (Javorick, 2004). The Ownership advantage is how a firm’s tangible and intangible assets are used in overcoming extra costs of doing business in the global market and explain why a home-grown country firm as opposed to a foreign firm manufactures in a foreign country. Location advantage offers explanation to why a home-based MNE may choose to manufacture in a foreign country instead of home country (Helpman et al., 2004). Lastly, internationalization advantage is attributed to why a home-based MNE may choose FDI instead of licensing to gain production in a foreign country (Athreye and Chen, 2009).

According to Moosa (2002), “Hymer (1976) organized the industrial organization hypothesis. Kindleberger (1969), Caves (1982) and Dunning (1988) further explained the hypothesis. This theory assumes that the firms when it establishes an enterprizes in another country it suffers from many disadvantages in comparison to local investors. The cultural aspects, languages, legal system and other factors play an important role in determining FDI. But there is increase in FDI. The theory explains about why firms invest in foreign countries. But the theory fails to explain the motivation for choosing the locations. This theory explains the expansion of FDI is due to capital, management, technology, marketing, and access to raw materials, economies of

In the analysis of the sector structure, the advantage of German FDI stock data over transaction data is that secondary FDI is included in the statistics. In the case of dependent intermediary holding companies with participating interests subject to the reporting requirements, the investor’s actual interest on which a direct investment is based can therefore be made visible in many cases.

The benefits brought by FDI to China are apparent. Economy is influenced by FDI in a number of ways. FDI involves transfer knowledge in the host country, which will create an increase on the existing stock of knowledge through labor training, the transfer of skills, and the transferring of new managerial and organizational experience. Also, it can help local corporations to access to advanced technology by capital accumulation in host countries (Mello, 1999 and Mello, 1997). Furthermore, FDI may allow China to develop in technology and knowledge which are not readily available locally, as a consequent increase productivity growth through the economy (Jose, 2003).

Dunning’s OLI paradigm (1976) is used to support firms to locate its production in countries that are financially beneficial for them. According to Dunning, “the paradigm offers a holistic framework to take in consideration all of the important factors that influence the decision of a MNE.” (Stefanović, 2008, p.241) FDI is determined through the composition of the three powerful advantages; ownership, location and internationalisation as shown in figure 1. The thesis is to assess, ‘why go multinational?’, ‘how to choose the best location?’ and ‘what actions have to be taken to enter a foreign market?’

China is an excellent country which has rapid changes in both social and economic after introduced the Open Door policy in 1982. With the economic reforms, it introduced many foreign companies to invest in China and has great influence on enterprises and market. The economy in China has developed at a high speed during last thirty years and growing at around 9.6 percent every year on average. China joined the World Trade Organization (WTO) in 2001 which means an extension of the reform, meanwhile, brings the new opportunities to Chinese companies’ growth. The development of both society and economy in China helped introduced foreign direct investment. At the same time, Chinese enterprises invested abroad and got access to foreign resources, new markets, human capital, technology, and knowledge. Therefore, multinational enterprise seems little by little to be a key factor in China’s economic ambitions which is also an essential role in the worldwide globalization.

On the basis of previous studies of foreign direct investment (FDI) in insurance services industries by Moshirian (1997 and 1999), this study applies the similar model and variable with those previous studies to present analysis and discussion about FDI in insurance services industries in America from 1987 to 1998. As the extension on prior studies, this study found that the relative wage rate of the US versus the source countries, and FDI in manufacturing industries both are highly important determinants of FDI in insurance services industries in America in statistic. However, this result is different from Moshirian’s (1997), due to majority of factors which are valued important in his study are unimportant in this study. The

the theories of FDI; section two will discuss the cases of both firms‘ strategic changes;

Several transactions occur every day in the international landscape and these are the special focus of the International Business. There are different relationships between companies, governments, and customers that shape the way business are conducted and challenge the strategy when a new market is going to be explored. There are two common activities that Multinational Enterprises MNEs perform: exports and imports, and foreign direct investments, these activities set a framework of regulations, policies, and economic considerations that vary according to the region or countries where MNEs act.

FDI through acquisition has been defined as ‘international investment made with the objective of obtaining a lasting interest, by a resident entity in one economy in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence on management of the enterprise.’ (OECD, 2015)

One of the most exceptional and economic wonders of the post-war period is the growth in a new form, known as multinational enterprise or venture (Buckley 1976). Multinational Enterprise otherwise called a MNE, is characterized as the association which involves itself in investing resources in a foreign land. Also known as foreign direct investment (FDI), this venture maintains a value added activities in more than one nation or country other than its home country. Few of the professional experts distinguish MNE’s as two different types, first one being the MNE organization which manages a set of huge self-governing multi-domestic foreign subsidiaries which mainly manufactures goods solely for its local market, secondly the organizations who treat their affiliates with utmost importance as they are considered the most vital part of global network for creating assets for the organization (Dunning 2008). There are numerous conditions which the literature has acknowledged to evaluate the Trans nationality of the organizations:

The third segment is devoted to the discussion of factors affecting FDI. The methodology of the study is described in fourth section. The fifth section provides the details of the results and final section presents the main conclusions and recommendations.

oreign Direct Investment as seen as an important source of non-debt inflows, and is increasing being sought as a vehicle for technology flows and as a means of attaining competitive efficiency by creating a meaningful network of global interconnections.

In the year 2014, the Government of India launched an ambitious campaign called the “Make in India”. The campaign’s main aim is to build and further develop the country’s manufacturing industry by making the country attractive for FDI. As a result of the launch of the campaign, within merely 9 months, from 2014 October to 2015 June, there was a rise in FDI by almost 40%. (Kaur, J. 2016). Out of the numerous objectives that Make in India sets its eyes upon, the following are relevant for the scope of this paper: