2. Introduction
Foreign Direct Investment (FDI) refers to cross-border
investment in which investor from one economy establishes
interest in another resident of another economy.
It includes acquisitions, mergers, partnerships in retail and
logistics and manufacturing.
Entry mode refers to a structural agreement that allows a
firm to expand its business into a non-domestic market.
The company is using different types of entry modes such as
joint ventures, foreign direct investment and franchising
3. Entry modes
Investment decisions are dependent on two factors:
assessment of risk and expectation of risk and
expectation of return.
The country risks are categorised into three types
such as political, financial and economic
Apart from country risks, cultural distance, market
size, location and entry mode are playing a
significant role in the survival of multinational
companies.
Country
Risks
Market
Size
Cultural
distance
Entry
Mode
4. Foreign Direct Investment (FDI)
The spread of novel coronavirus has
reduced the foreign investment.
The outbreak of the Covid-19 has
influenced the markets such as oil price,
international trade and exchange rate
The pandemic has reduced both intensive
and extensive margins of FDI
5. Impact of Covid-19 on FDI
The Covid-19 outbreaks has created a negative
impact on FDI inflows
The spread of the Covid-19 resists investors to
invest, especially where the cases are high
The lethality and infectiousness of Covid-19
decreased the intensive margin of FDI
completeness in emerging host countries
6. Method of data collection methods
The FDI decisions are analysed considering two margins:
extensive and intensive
Heckman two-stage bias selection approach has been
applied to explore the significant of the Covid-19.
On the other hand, secondary data collection method has
been used to explore the effect of entry mode on the stability
of the company.
Hypotheses approach has been applied to determine the
positive and negative impact of relevant factors on the multi-
national companies
7. Identification of factors that affect the
survival of firms in the foreign market
The primary three modes to enter foreign market are
contractual joint ventures, equity joint ventures and
wholly owned subsidiaries.
Apart from this, marketing size, cultural distance and
country risk have significant impact on the business.
However, the survival of the company is measured
using binary coding (0,1). Firm that are still active
assigned 0 and firms that are delisted are assigned 1.
8. The result of hackman model for fdi completion
The Covid-19 infectiousness in the host country has a
negative impact on the new investment decisions
Investors are unwilling to invest in a country where
number of deaths are higher
The completion of FDI transactions experienced
delayed when home country is suffering higher
lethality
9. The study stated that cultural risk has a negative impact on the survival of
multinational, especially in China
In China, the managers are required to invest in Eastern China and wholly
owned subsidiaries help the companies to reduced the barriers
However, to increase FDI, countries are required to implement control
activities and epidemic decisions so that death rates can be reduced
Conclusion
10. Fu, Y., Alleyne, A. and Mu, Y., 2021. Does Lockdown Bring Shutdown?
Impact of the COVID-19 Pandemic on Foreign Direct Investment. Emerging
Markets Finance and Trade, pp.1-20.
Wang, C. and Giouvris, E., 2020. Firm Survival between Manufacturing and
Non-Manufacturing Industries: Cultural Distance, Country Risk, Entry
Mode, Market Size, Firm Age and Location. The Chinese Economy, 53(5),
pp.412-431.
References
