Foreign Direct Investment Essay Example | Topics and Well Written Essays - 2250 words

Foreign Direct Investment - Essay Example Foreign Direct Investment refers to the investments that a multinational firm makes when it is initially located in one country but decides to locate to or acquire substantial production facilities in another country. FDI is a significant factor in operation of MNCs. As Bernard, Jensen and Schott [2] point out, its importance to the U.S. economy is demonstrated by the fact that about 90% of all exports from and imports into the U.S. flow through a U.S. MNC while roughly 50% of the trade flows in fact occur between subsidiaries or affiliates of the same MNCs.[2]. Foreign Direct Investment in another country could take place through the financing of new investments within the target country or even through mergers and acquisitions of local firms and production facilities, etc by a multinational entity, with the value of mergers increasing from 52% of the FDI in 1987 to 83% in 1999, as per UNCTAD [13].1.2:  Ã‚  Ã‚   Benefits of Foreign Direct Investment:  Foreign Direct Investment c an be beneficial to a multinational firm in several ways and Isobe et al [8] have examined the multinational firm in the context of technology transfer. They have examined the impact of early movers in technology within emerging economic regions as far as performance is concerned by studying 220 Japanese multinational companies that have set up their business in China. The findings in this study suggested that a multinational firm gains from technology transfer especially when the degree of commitment of the firm is high.