Lecture 9

1. International Economics
Lecture 9

2. Foreign Direct Investment

3. Foreign Direct Investment
FDI

4. Organization for Economic
Development and
Cooperation

5. Organization for Economic
Development and
Cooperation
OEDC
Paris
29 Countries

6. FDI

7. FDI
Inflow - Each year
Stock - Accumulation
Outflow - Each year

8. FDI
Year Inflow Outflow Stock
1 100 0 100
2 150 0 250
3 0 25 225
4 50 0 275

9. FDI - Two Types

10. FDI - Two Types
Greenfield - New
Mergers and Acquisitions

11. FDI
2001 2004 2008
Greenfield 22% 41% 60%
M &A 78% 59% 40%

12. Why FDI?

13. Why FDI?
Circumvent
Protectionism

14. Why Merger & Acquisition?

15. Why Merger & Acquisition?
Quick
Strategic Assets
Improve Productivity

16. Three Choices

17. Three Choices
Export
License
FDI

18. Limitations of Exporting

19. Limitations of Exporting
Transportation Costs
Value to Weight Ratio
Trade Barriers

20. Limitations of Licensing

21. Limitations of Licensing
Lose Technology
Lose Mfg. & Mkt.
Hard to license brand culture