...College of 2-1-2011 ESSAYS ON INTERNATIONAL TRADE AND FOREIGN DIRECT INVESTMENT Wanasin Sattayanuwat University of Nebraska - Lincoln, wanasin@yahoo.com Follow this and additional works at: http://digitalcommons.unl.edu/businessdiss Part of the Business Commons Sattayanuwat, Wanasin, "ESSAYS ON INTERNATIONAL TRADE AND FOREIGN DIRECT INVESTMENT" (2011). Dissertations and Theses from the College of Business Administration. Paper 18. http://digitalcommons.unl.edu/businessdiss/18 This Article is brought to you for free and open access by the Business Administration, College of at DigitalCommons@University of Nebraska Lincoln. It has been accepted for inclusion in Dissertations and Theses from the College of Business Administration by an authorized administrator of DigitalCommons@University of Nebraska - Lincoln. ESSAYS ON INTERNATIONAL TRADE AND FOREIGN DIRECT INVESTMENT by Wanasin Sattayanuwat A DISSERTATION Presented to the faculty of The Graduate College at the University of Nebraska In Partial Fulfillment of Requirements For the Degree of Doctor of Philosophy Major: Economics Under the Supervision of Professor Craig R MacPhee Lincoln, Nebraska February 2011 ESSAYS ON INTERNATIONAL TRADE AND FOREIGN DIRECT INVESTMENT Wanasin Sattayanuwat, Ph.D. University of Nebraska, February 2011 Advisor: Professor Craig R MacPhee This dissertation comprises three separate essays on international trade and foreign direct investment. We...
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...INTERNATIONAL TRADE & INVESTMENT Prof. Dr. Natalia Ribberink World Trade Center, Seoul, South Korea (Picture: Ribberink) INTERNATIONAL TRADE & INVESTMENT Preliminary Notes World Trade Center, Seoul, South Korea (Picture: Ribberink) Preliminary notes • Combination of lecture, seminar, group work and other forms of learning as appropriate; • Grading: working paper 60%, case studies 40% • Communication: natalia.ribberink@haw-hamburg.de © Prof. Dr. Natalia Ribberink 3 Agenda Chapter 1: Chapter 2: Chapter 3: Chapter 4: Chapter 5: International trade and investment environment International trade policy and instruments Forms of international trade FDI theories, patterns and forms FDI policy instruments For details s. Syllabus (will be provided in class on Nov 10, 2015). © Prof. Dr. Natalia Ribberink 4 Message icons Further reading Question for group discussion Case study Int. Trade & Investment Vocabulary © Prof. Dr. Natalia Ribberink 5 Online sources: AuslandsGeschäftsAbsicherung des Bundes: www.agaportal.de Außenwirtschaftsportal: www.ixpos.de Berne Union: www.berneunion.org.uk Kreditanstalt für Wiederaufbau: www.kfw.de OECD: www.oecd.org Statistisches Bundesamt Deutschland: www.destatis.de The Economist: www.economist.com UNCTAD: www.unctad.org World Trade Organisation: www.wto.org © Prof. Dr. Natalia Ribberink 6 CHAPTER 1: International trade & investment environment Westside Market...
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...Effect of FDI on Bilateral Trade Abstract Contemporary literature refers to trade and Foreign Direct Investment (FDI) as alternative strategies. The debate is mainly between two notions: (1) that FDI displaces trade, and (2) that FDI and trade complement each other. Literature on FDI talks about the effect of foreign investments on trade. Lipsey (2002) mentions that outward FDI may decrease or increase (or have no effect on) exports of home country. These effects depend largely on the competitiveness of the host country and the motives behind investment by the home country in the host country. This paper is aimed at studying the effect of FDI on bilateral trade as well as effect at the aggregate level especially in the developed-developing nation paradigm. Introduction Literature suggests that there are a number of motives on which FDI takes place across nations. Most of the firms in the developed countries will go for foreign investment once they fulfill their domestic market and they in order to grow will go to foreign market. In this case the main motive of a firm is to tap new markets. This entry of one firm in to a foreign market will create a bandwagon effect thorough which their competitors will also enter that market. Again, when the competition sets in the foreign market, companies will be forced to take cost reduction measures to achieve higher profits will look for other destinations which have lower cost of production and thus the motive will become efficiency...
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...America Kristin Daughdril & William Cassidy Business Administration 418 Abstract Foreign Direct Investment (FDI) is an investment involving a long-term relationship and reflecting a lasting interest in and control by a resident entity in one economy of an enterprise resident in a different economy (UNCTAD). There are two types of FDI, inflows and outflows, which can be used to help determine the investment strategies and economies of countries engaged in FDI. North America has been the source of nearly one-half of all investment and almost three-quarters of the jobs created throughout the globe (Huggins, 442). North America is probably the most important continent when it comes to dealing with FDI. The three main countries of North America, the United States, Canada, and Mexico, all rank in the top 15 of world economies, proving them to be desirable partners in FDI transactions. The trends of FDI discussed in this report will be unparalleled to this information and can lead to some predictions on how future trends of the countries of North America will continue to be superior to that of the other continents of the world. Keywords: Foreign Direct Investment, FDI Inflow, FDI Outflow Foreign Direct Investment is investment of a company located in a different country either by buying a company in the country or expanding its business into the country. FDI can be done for many purposes. Companies may have tax incentives abroad, cheaper labor, abundant resources, target-specific...
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...World Economy FDI: The OLI Framework 1 Foreign Direct Investment: The OLI Framework The “OLI” or “eclectic” approach to the study of foreign direct investment (FDI) was developed by John Dunning. (See, for example, Dunning (1977).) It has proved an extremely fruitful way of thinking about multinational enterprises (MNEs) and has inspired a great deal of applied work in economics and international business. In itself it does not constitute a formal theory that can be confronted with data in a scientific way, but it nevertheless provides a helpful framework for categorizing much (though not all) recent analytical and empirical research on FDI. This survey first summarizes the OLI paradigm and then uses it as a lens through which to review some of the highlights of this research, while also noting some important issues that it neglects. “OLI” stands for Ownership, Location, and Internalization, three potential sources of advantage that may underlie a firm’s decision to become a multinational. Ownership advantages address the question of why some firms but not others go abroad, and suggest that a successful MNE has some firm-specific advantages which allow it to overcome the costs of operating in a foreign country. Location advantages focus on the question of where an MNE chooses to locate. Finally, internalization advantages influence how a firm chooses to operate in a foreign country, trading off the savings in transactions, holdup and monitoring costs of a...
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...CONCEPT OF MNC A multinational corporation is an enterprise that carries on business operations in more than one country. It extends its manufacturing and marketing operations through a network of branches and subsidiaries which are known as its foreign affiliates. According to a report of international labour office the essential nature of multinational enterprises lies in the fact that its managerial headquarters are located in one country while the enterprise carries out operations in a number of other countries as well.´ CHARACTERISTICS OF MNC: * Large size * Worldwide operations * Centralized control * Sophisticated technology * Professional management * International market * High brand equity ROLES OF MNC 1) MNC’s help to increases the investment level & thereby the income & employment in host country. 2) The transnational corporations have become vehicles for the transfer technology, especially to developing countries. 3) They also initiate a managerial revolution in host countries through professional management and employment of highly sophisticated management techniques. 4) The MNCs enable that host countries to increases their exports & decreases their import requirements. 5) They work to equalize cost of factors of production around the world. 6) MNC’s provide and efficient means of integrating national economies. 7) The enormous resources of multinational enterprises enable them to...
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...UNIT 2 INTERNATIONAL BUSINESS THEORIES International Business (Trade) Theories Objectives After reading this unit, you should be able to : • understand the analytical foundations of international business • be familiar with the international trade theories • explain the FDI approaches to international business. Structure 2.1 Foundations of International Business 2.2 International Trade Theories Theory of Mercantilism Theory of Absolute Cost Advantage Theory of Comparative Cost Advantage Heckscher-Ohlin Model Leonief Paradox 2.3 FDI Theories Market Imperfections Approach Product Life Cycle Approach Transaction Cost Approach The Eclectic Paradigm 2.4 Summary 2.5 Key Words 2.6 Self-assessment Questions 2.7 Further Readings 2.1 FOUNDATIONS OF INTERNATIONAL BUSINESS The analytical framework of international business is build around-the activities of MNEs enunciated by the process of internationalisation. The FDI on the part of an MNE attempts to overcome the obstructions to trade in foreign countries. The strategies relating to the functional areas, such as production, marketing, finance and price policies, are adopted by the MNEs in such a manner that an amicable relationship between home and host nations is created. Foreign direct investment can be distinguished from the other forms of international business, such as exporting, licencing, joint ventures and management contracts. Basically...
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...The global context of business Chris Britton Businesses of all sizes operate in international markets – products are sold across borders; the resources used in production can come from anywhere in the world; communication is instantaneous; and financial markets are inextricably linked, as the events of 2008 demonstrate. Individual businesses operate across borders in a variety of ways – they can do this directly, through the formation of strategic alliances or through merger and takeover. It is clear then that businesses need to be aware of the global context of their markets. Having read this chapter you should be able to: G G G G Learning outcomes understand the difference between globalisation and internationalisation outline the main elements of globalisation illustrate the role of the multinational enterprise introduce the implications of globalisation for business Key terms Capital market flows Consortium Cross-subsidisation Customs union Emerging economies Foreign direct investment (FDI) Franchising Free trade area Globalisation Hyperglobalisation Internationalisation International trade Joint venture Licensing Multinational enterprise (MNE) Regionalism Regional trade agreements (RTAs) Strategic alliance Transfer pricing Transformationalism Globalisation versus internationalisation 39 Introduction Businesses operate in a global context: even if they do not trade directly with other countries, they might be affected by a domestic shortage of...
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...manager who works abroad, or "expat" for short. Foreign direct investment (FDI) Investment in, controlling, and managing value-added activities in other countries. Global Business Business around the globe. Globalization The close integration of countries and peoples of the world. Gross domestic product (GDP) The sum of value added by resident firms, households, and governments operating in an economy. Gross national income (GNI) GDP plus income from non-resident sources abroad. The term used by the World Bank and other international organizations to supersede the term GNP. Gross national product (GNP) GDP plus income from non-resident sources abroad Group of 20 (G-20) The group of 19 major countries plus the European Union (EU) whose leaders meet on a biannual basis to solve global economic problems. International business (IB) (1) A business (or firm) that engages in international (crossborder) economic activities and/or (2) the action of doing business abroad. International premium A significant pay raise when working overseas. Liability of foreignness The inherent disadvantage that foreign firms experience in host countries because of their non-native status. Multinational enterprise (MNE) A firm that engages in foreign direct investment (FDI). Nongovernmental organization (NGO) An organization that is not...
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...presentation we listened to was about economic freedom's effects in host countries and FDI. The objective was investigating the influence of economic freedom in foreign direct investment. In this poster there were 6 different variables and hypothesis and they're tested with statistical analysis. After these analysis we saw that hypothesis one, which is "Trade and investment barriers will be inversely related to the inflow of FDI." was the only one that rejected while other ones were supported. With these informations the conclusion of the research was that MNE's prefer the countries that have least government intervention which is equal to political freedom. The next presentation was about growth and if it attract FDI. The main purpose of the research was to investigate if success in economic growth attract FDI. To investigate this the researchers used theories about how economic growth either attract, deterrent or is neutral towards FDI. To investigate this they used a quantitative approach that is based on 946 observations from 140 empirical studies. The results gave that that growth is a significant determinant of FDI but decides of the partial correlation is rather small. They also found that the economic growth is more important for developing countries. The conclusion gave that economic growth is an important determinant for FDI. The third presentation was about influence of international trade agreements on...
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...Globalization and Economic Interdependence: 1. What does globalization mean? Globalization is the acceleration and extension of the interdependence of economic and business activities across national boundaries, in other words a development on one side of the globe will have consequences on another. As a consumer, it means more choices, generally lower prices, and increasingly blurred national identity for products and services. How do the statistics of world trade and direct investment show the trend of globalization? Globalization allows for countries to expand outside of their own country for resources. With this being done, more and more countries are able to interact in world trade and direct investment, which correlate to the trend of globalization increasing. 2. What are the main drivers of globalization? Accelerated technological change, liberation of trade and investment and investment in many countries, and entrepreneurship and competition among firms (location economies, economies of scale, and economies of scope). How do location economies, economies of scale and economies of scope motivate firms to expand their operations overseas? Location economies refer to the cost efficiencies that a firm can achieve by locating some of its activities overseas. Such cost efficiencies can result from lower labor or raw material costs, superior labor skills, or elimination of transport or tariff costs. Economies of scale refer to the reduction of average production costs due...
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...International trade as a proportion of GDP reached 24% by 2006, up from 6% in 1985 and still relatively moderate.[3][4] India currently accounts for 1.2% of World trade as of 2006 according to the World Trade Organisation (WTO).[5] Until the liberalisation of 1991, India was largely and intentionally isolated from the world markets, to protect its fledgling economy and to achieve self-reliance. Foreign trade was subject to import tariffs, export taxes and quantitative restrictions, while foreign direct investment was restricted by upper-limit equity participation, restrictions on technology transfer, export obligations and government approvals; these approvals were needed for nearly 60% of new FDI in the industrial sector. The restrictions ensured that FDI averaged only around $200M annually between 1985 and 1991; a large percentage of the capital flows consisted of foreign aid, commercial borrowing and deposits of non-resident Indians.[6] India's exports were stagnant for the first 15 years after independence, due to the predominance of tea, jute and cotton manufactures, demand for which was generally inelastic. Imports in the same period consisted predominantly of machinery, equipment and raw materials, due to nascent industrialisation. Since liberalisation, the value of India's international trade has become more broad-based and has risen to 63,080,109 crores in 2003–04 from 1,250 crores in 1950–51.[citation needed] India's major trading partners are China, the US, the UAE...
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...MFI 442 International Finance-Individual Assignments I Name Institution MFI 442 International Finance-Individual Assignments I Most corporations expand beyond their local boundaries to become multinationals. There are myriad reasons behind this (Wells & Wint, 2000). The biggest of all these reasons is to gain access to international markets and perhaps invest in economic zones that have high investment returns as compared to home countries (Fu, 2000). The trend of globalization has made most firms become multinational corporations. The most common method for MNCs is through franchises (Jones, 2005). In line with this, economists have put up theories explaining why businesses expand beyond their national boundaries (Hicks, 2000). My primary objective in this paper, therefore, is to discuss international finance and other macroeconomics policies. To foresee this goal, I will delve into foreign exchange market and operations of multinational corporations (MNCs). Theories Explaining Why Corporations Expand to become Multinationals a). Financial economists have brought forward three key arguments that enumerate why companies expand their operations to global markets. These theories are; the imperfect markets theory, the comparative advantage theory and the product cycle theory (Levi, 2004). i).The Comparative Advantage Theory This theory is among the most important concepts in international trade. It states that economic welfare increases when countries specialize...
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...Clinton in 2000 was the culmination of American efforts to normalize relations with the former enemy. In 1986 the Doi Moi resulted in Vietnams sucessful transition to a socialist orientated market economy. Elements of market forces and private enterprises were introduced soon after and a stock exchange opened in 2000. In 2007 Its successful economic reforms resulted in it joining the World Trade Organization which has promoted more competitive, export-driven industries, It also became an official negotiating partner in the Trans-Pacific Partnership trade agreement in 2010. These lifts in protectionism has meant that poverty has declined significantly however, Vietnam is still working to create jobs to meet the challenge of a labor force that is growing by more than one million people every year. It also still suffers from relatively high levels of income inequality, disparities in healthcare provision, and poor gender equality. This essay aims to firstly set out the role of the WTO and why Vietnam sought accession, it will then discuss both the positive and negative impacts that freer trade has had on the country. Vietnam joined ASEAN/AFTA in 1995, ASEM in 1996, and APEC in 1998. In January 1995, Vietnam applied for WTO...
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...Mexico signed the North American Free Trade Agreement to achieve the higher level of regional integration. This NAFTA not only concerns the removal of trade barriers, but also aims to promote the movement of capital. Firstly, this essay will explain the evolution of NAFTA and its successful influence on economic integration. Furthermore, this chapter will provide the criticism on the influence of NAFTA. Secondly, this study will discuss the impact of NAFTA on regional integration, particularly economic integration. Then, this essay will propose the understandings on the effect of NAFTA on members’ economies and businesses from four perspectives, including trade, economic growth, employment and FDI. Main body The Evolution of NAFTA The North American Free Trade Agreement (NAFTA) issued in 1993 aims to removal trade barriers and liberalise economics and business among the United States, Canada and Mexico. Compared with similar FTA economic relationship, such as EU, NAFTA is described as the most implemented FTA (Orme, 1996). Like most FTAs, NAFTA not only effectively coordinates resource and improves competitiveness of countries and corporates, but also promotes the movement of products, services and investment, even financial integration. For instance, Krugman & Hanson (1993) stress that the implementation of NAFTA can facilitate firms obtain more production resource and achieve the performance of scale economies. Based on the elimination of trade barriers and tariffs, the free movement...
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