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Chapter 15 Multinationals and Migration

Chapter 15 Multinationals and Migration. a. Multinationals. Link to syllabus. FDI – Foreign Direct Investment (p. 345).

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Chapter 15 Multinationals and Migration

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  1. Chapter 15 Multinationals and Migration a. Multinationals Link to syllabus

  2. FDI – Foreign Direct Investment (p. 345) • Flow definition: Flow of funding provided by investors (usually firms) to establish or acquire foreign companies or to expand or finance existing foreign companies that the investors own. • Key is sufficient ownership to control or influence the management of the foreign company. • Stock definition: Total value of existing funding (equity and debt) of foreign companies that has been provided by investors that own these foreign companies. Multinational (or Transnational) Enterprise (or Corporation) A firm that owns and controls operations in more than one country Portfolio vs. Direct Investment

  3. Figure 15.1 p. 348. Major Stocks of (Outward) FDI, 2008

  4. US International Investments/GDP Data source: US DoC

  5. Why do MNEs Exist? (pp. 349-50) • First, acknowledge that there are inherent disadvantages of operating a foreign affiliate competing against local firms. • Firm-specific advantages of the MNE, especially intangible assets. (a.k.a. organizational advantages). • Location factors based on resource costs and availability, customer demand, government policies, and other considerations. • Internalization advantages in using these assets. • Oligopolistic rivalry that uses FDI in the firms’ strategies for competing. Sometimes referred to as international industrial organization Major proponent of this perspective is John Dunning – ‘eclectic theory.’ and the OLI theory.

  6. Implications of the Dunning/OLI Model Foreign direct investment is often a ‘good thing’ – although we must remember that it will have effects on income distribution, as well as on output and employment. There are several important examples when FDI does not increase national welfare, such as when it is attracted by tariffs or subsidies, or political power. FDI will probably be associated with higher profits, import and/or export propensities, higher wages, more capital intensity. One should view FDI as part of a dynamic world (product cycle) FDI will vary by productive sector OECD countries have lots of both IFDI and OFDI For many countries, FI and FDI have greatly different values.

  7. Table illustrating transfer prices (Pugel, p. 356)

  8. OLI in Turkey Journal of Management Development Vol. 27, #7. 2008

  9. Exporting Jobs and Sales More sales from US subsidiaries overseas, than from US firms in the USA. Source: NYT April 19, 2004

  10. Outsourcing by Toyota Source: NYT Oct 21, 2003

  11. Narula/Dunning Investment Development Path Source: UNCTAD: World Investment Report, 2006

  12. Outward Foreign Investment, OECD Countries, 1913-1995

  13. Outward FI/GDP, Twentieth Century

  14. FDI/GDP

  15. FDI outward stock, by Region. Selected years (billions of current US dollars) Source seems to be WIR

  16. Accumulated Foreign Direct Investment into the US, 2001.

  17. US. Direct Investment Abroad 2001

  18. Inward FDI Stocks in the US, by State. Thompson: International EconomicsExample 8.13. Page 294

  19. Inward and Outward FDI/GDP, 1980-2000

  20. Japan: Outward FI/GDP

  21. Example 8.6 FDI between US and Japan. Page 281 Year is probably around 1990 Source: Thompson: International Economics

  22. Canada: Accumulated Inward Investment/Total Capital Stock

  23. Canada: Foreign Ownership Ratios, by Sector

  24. Mexico: Foreign Ownership of Capital, 1910-1990

  25. FI from Oil Exporters US 2006 Outward FI $1,062b Outward FDI $235b Source: NYT November 28, 2007

  26. China: NYT Nov. 24, 2002

  27. Figure 7.1 EU FDI Inflows, 1984-98 page 148 Hansen: European Integration

  28. Table 7.4 Intra-EU FDI Flows. Page 152 Hansen: European Integration

  29. Figure 7.2 EU Cross-border M&A in Manufacturing. Page 149 Hansen: European Integration

  30. Table 7.3 Share of firms’ main motives for M&A Page 191 Hansen: European Integration

  31. Figure 7.3 Share of Intra-EU FDI, by Sectors. P. 154 Hansen: European Integration

  32. Table 7.5 Share of Intra-EU FDI in MFG., by Technology. Page 155 Hansen: European Integration

  33. Table 7.6 Intra-EU FDI Flows of France. Page 156 Hansen: European Integration

  34. Figures 7.4 and 7.5. FDI Net Outflows from France inside the EU. Page 157 Hansen: European Integration

  35. Figure 7.6 Trade and FDI between France and EU, 1998. P 159 Hansen: European Integration

  36. US: Inward & Outward FDI Flows, 1982-2004

  37. Narula/Dunning Investment Development Path

  38. US FI/GDP, 1900-2000

  39. World IFDI, OFDI

  40. Top TNCs from LDCs

  41. US: Net International Position, 1988-2005 Source: US DoC. http://bea.gov/bea/newsrelarchive/2006/intinv05_fax.pdf

  42. Link to IIP data Link to intinv05_t2.xls

  43. FDI inward stock, selected years (billions of current US dollars) Source: World Investment Report

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