Corporate Strategy and Foreign Direct Investment in Developing Countries Such as India

Many governments, especially in industrialized and developed nations, pay very close attention to foreign direct investment because the investment flows into and out of their economies can and does have a significant impact.

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).

One of the important factors of the growth in China and Brazil as BRIC countries is Foreign Direct Investment (FDI). There are several factors that contribute to attract FDI including market size, institutional and regulatory quality, trade openness, infrastructure quality, economic and political stability, and labor quality and cost (The World Bank, 2011). China is still the most attracting for FDI among any other BRIC members (UNCTAD, 2012). Huge amount of market, low inflation and stability of their government are might be the factors that attracted the FDI in China. According to the ministry of China, “Investment from the United States decreased by 26.1 percent in 2011 to $3 billion, while that from the European Union decreased by 3.65 percent to $6.3 billion” so, China’s FDI was hit by the global financial crisis in the EU and US. However, The most attracted FDI in Brazil is in market size sector with the fact that Brazil will be the host of

Figure 1.7 The structure of the dissertation Figure2.2 Modes of entering foreign markets Table 2.32 Factors affecting the FDI decision Figure 2.33 Types of FDI 12 15 19 22

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)

Zhang portrays that the export levels in China rose as a result of the expansion of multinational corporations. This suggests that as exports are a component of aggregate demand as exports rise aggregate demand rises meaning China 's economy is growing in theory. This is supported by Sun (2002) by showing the macroeconomic impacts that FDI induces. He recognises that FDI influences trade flow as he sees that China 's total trade volume relative to GDP rose from 15.2 percent in 1980 to 26.8 percent in 1995. The more coastal you go the more influential the foreign direct investment contribution becomes.. Sun concludes that FDI is a form of trade creating in China. Chen (1999) ran cross-sectional regressions on 29 provinces in different years and confirmed that FDI does positively impact upon both promoting China 's host province total trade flows with the rest of the world and on increasing bilateral trade flows between China and its trade partners. The journal raises the idea of FDI and technological advancement promoting economic growth to be inconclusive. Naughton (1996) highlights a number of factors that limited the impact of FDI on China 's domestic economy. He states that the FDI was distributed provincially especially in Guandong who prosper from investment coming in from Hong Kong. Secondly, up to 1991 most of the output of FIEs was exported meaning that the foreign firms that were present gave no significance; foreign investment also never went above one

This essay will give a general introduction about the location choice of foreign direct investment (FDI). After that, it will focus on

Within this frame, the literature considered in this overview assumes that FDI is good as a matter of fact. As Jensen puts it, foreign investment “is an engine of employment, technological progress, productivity improvements, and ultimately economic growth. FDI provides both physical capital and employment possibilities that may not be available in the host market. More importantly, FDI is a mechanism of technology transfer between countries, particularly to the less-developed nations” (Jensen, 2003: 587; See also Li & Resnick, 2003). However, the empirical research seems to provide contradictory results (Greenaway & Kneller, 2007; Moran, Graham, & Blomström, 2005) or the outcomes are at least un-informative (Rodrik, 2012). Would be necessary also to take into account to what extent incentives and subsidies offered

We have looked at FDI as the first major in our paper because FDI inflows point to a lot of factors that are right (or wrong) with the economy. In our opinion China remains an attractive FDI destination based purely on the fact that the extent of development possible is still large and the development thus far has been highly skewed, both in terms of demography and geography. Thus China’s capacity to absorb funds remains as high as ever, despite questions being raised about the undervalued currency.

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.

First of all, the investment flow into the host country does not produce an immediate effect but accrues benefits over a period of time and the level of the positive effect may vary from country to country. The conditions that FDI faces in the developing countries may slow down the process. The issue is that in order to make use of all benefits, which were discussed earlier, the host country has to have a certain level of education, technology, sufficient openness to trade and appropriate policy regulations. The restrictive policy or insufficient precondition state of economy of the host country will not bring the expected advantages. Moreover, the developing states having a low development level may experience certain disadvantage of the foreign direct

Foreign direct investment (FDI) is an investment made by a company or individual in one country in business interests in another country, in the form of either establishing business operations or acquiring business assets in the other country, such as ownership or controlling interest in a foreign company. Foreign direct investments are distinguished from portfolio investments in which an investor merely purchases equities of foreign-based companies. The key feature of foreign direct investment is that it is an investment made that establishes either effective control of, or at least substantial influence over, the decision making of a foreign business.

Foreign direct investment (FDI) can be defined as a process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distributions and other activities of a firm in another country (the host country). FDI also have another definition like ‘an investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor’s purpose being to have an effective voice in the management of the enterprise’- International Monetary Fund’s Balance of Payment Manual and ‘ an investment involving a long-term relationship and reflecting a lasting interest and control of a resident entity in one economy (foreign

[UNCTAD2003] As a result, global FDI grew much faster than either trade or income in the last two decades. Whereas world real GDP increased at an average rate of 3.00% between 1985 and 2004 and world exports by 6.29%, world real inflows of FDI increased by 9.85%. The liberalization processes varied considerably, however, across countries in timing, speed, and magnitude.

FDI in a developing economy means the development of the entire national economy on a grand scale, benefiting several other support industries, development of the country 's infrastructure, raising standards of living and increasing per capita income. World-leading manufacturers on