Foreign Direct Investment ( Fdi )

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Foreign direct investment (FDI) has played a huge part of the international economy influencing economic growth globally with a total of $1.2 trillion spending via it in 2014 (UNCTAD, 2015). Over the past five years from 2011 to 2016 the UK has seen its FDI increase by almost double to 2213 individual FDI projects, this being an increase of 11% from 2014/15 to 2015/16 (Department for International Trade, 2016). The UK also stands out as the clear leader in attracting this FDI into the UK taking a total of 20.9% of the market share of FDI in the European union (Ernst & Young LLP, 2016). FDI is becoming an influential power within the economic system for the UK. A current FDI project underway seeing the constructing of a new nuclear power…show more content…
Hymer (1976) followed along with this work stating that there are two determinants for FDI, the first being the removal of competitors and second being that advantages that some firm possesses. In the case of EDF would have more advantages internally due to their experience in France operating the nation’s 58 nuclear power stations and others based outside of France. Buckley and Casson (1998) suggest that this is often the normal practice of when a local firm has monopolised the market, foreign investments often have greater technological prowess and efficiency (Blackman and Wu, 1999) compared to uncompetitive state-owned monopoly so rather than competing its best option is to exit the industry. EDF seems to follow the gravity model in which FDI is better executed between nations geographically close (Tinbergen 1962; Pullainen 1963). British Energy having the culture, language and legal systems of the host nation do create some positives within the organisation that a foreign rival would not have acquired as well British Energy being state-owned suggest a potential consumer preference (Hymer, 1976). However, since firms can transfer the advantages across the department and overseas as discussed by Caves (1971), which most likely has become more effective with the increase in technology, EDF would have been too advanced and efficient for British Energy to compete

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