Analysis Of Backward Vertical FDI

What is the difference between vertical and horizontal FDI? Give one example of an industry or each type. “Vertical FDI is when a company invests internationally to provide input into its core operations – usually in its home country” (Carpenter & Sanjyot, 2013). “Horizontal

FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)

transactional costs. This can be achieved through vertical integration where the firms relocate their own suppliers and customers to a foreign market in the attempt to minimize costs such as additional transportation costs, tariffs and exchange rate fluctuation. It is understood that when market risk and uncertainty is high, then transaction costs are high, and internalisation of operations (undertaking of FDI) is preferred (Assunção, Forte & Teixeira, 2011,p.5). Government policies on subsidies, tariffs, tax holidays and incentives, exchange restrictions and foreign investment restraints may influence FDI. A host country may attempt to protect their domestic industries via the implementation of higher import tariffs. The higher the import duties, the higher the cost of importing, reducing profit margin and in turn discourage firms from importing goods. This component explains why MNEs prefer to undertake FDI rather than alternatives such as exporting or licensing to gain entry into the market. (Denisia, 2010, p. 108).

This internationally competitive industry and sustainable growing economy of India shows the bright future of FDI in India. India is estimated to require around US $ 1 trillion during the 12th Five-Year Plan period (2012–17), to fund infrastructure in sectors such as roads, airports and ports. The government is in the process of liberalizing FDI norms in construction activities and railways, which could attract more investments to meet the target.

Foreign Direct Investment refers to the type of investment into a country that is characterized by the inflow of funds from a foreign source that can be in the form of ownership such as stocks, bonds, infrastructural presence, etc. by the element of ‘control’. FDI is defined as the net inflows of investment to acquire a management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.

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

Several sources (Aswathappa, 2012; Jensen, 2012) have identified FDI as an investment, made by a company based in one country (home country) into another company, which is based in other country (host country), in order to obtain certain degree of management control over that company.

Here it is important to explain some definitions used by Tadesse and Shukralla before continuing. Horizontal diversification is the acquisition or merger of competitors in a same, similar or different business (Hitt, Ireland, & Hoskisson, 2015). Foreign Direct Investment (FDI) is an investment made by a company or entity based in one country, into a company or entity based in another country (Investopedia, 2003).

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

One striking feature of the sector financial system in recent a long time has been the growth of foreign direct investment (FDI), or funding by using transnational businesses in overseas international locations in an effort to manage belongings and manage production activities in those nations.

For a country to be involved in Foreign Direct Investment (FDI) means that their resources participate in another countries business. Both people and technology can have an involvement in being transferred between two countries for the process of FDI. This is established by an investor which can be anything from a government body, a company or even an individual. When looking deeper into FDI over recent years (from 1980 onwards) patterns begin to develop globally and the financial crises tend to have a huge impact on FDI inflows in both developed and developing economies.

Based on OECD Factbook 2013: Economic, Environmental and Social Statistics, Foreign direct investment defined as cross-border investment by other investors from the economy that had the objective to gain long term interest or benefit from other countries that need capital for development. FDI have divided into 3 categorty such as Horizontal FDI, plaform FDI and vertical FDI. Kimberly state that Foreign direct investment is global economic growth which are apply in all countries such as developing and emerging market countries. The main purpose of FDI that the investor from other countries invests the surplus capital to other countries to gain benefit. At same time, the developing countries will gain more advanatge on

For growing economies, Foreign Direct Investment (FDI) has momentous advantages over equity and debt capital flows. Most of the foreign firms that start their conduct of business in other countries, they not only come with capital but transfer modern technology, promote human capital by training the host country’s employees according to the change of technology to those countries, and this is the key for the development of the host country.

Resources that are invested by foreign companies help in boosting the economic development that also includes increase in employment rate. Output of the country increases as FDI bring along with them new technology, efficient management that make use of resources efficiently, and make use of unemployed population of recipient country. Many researchers have focused the positive aspects associated with FDI (Xu and Wang, 2007).

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.