Foreign Direct Investment

What is Foreign Direct Investment (FDI)?

• A country invests directly in new facilities to produce or market in another country.

• A country invests indirectly in new facilities in another country.

• A country invests in local facilities to avoid foreign markets.

• A country invests in stock markets of foreign countries.

What is the form of FDI known as Greenfield investments?

• Forming a joint venture with a local company.

• Investing in the stock market of a foreign country.

• Establishing new operations in a foreign country.

• Acquiring an existing company in a foreign country.

Why do companies prefer to invest in research and development rather than outsourcing?

• To enhance their intellectual property portfolio.

• To maintain control over proprietary information.

• To reduce dependency on external vendors.

• To ensure alignment with long-term business goals.

What are the advantages of FDI for the host country?

• Decrease in economic growth and innovation.

• Creation of jobs and transfer of valuable resources.

• Increased competition leading to higher prices.

• Capital outflows due to repatriation of earnings.

What is the Eclectic Paradigm according to John Dunning?

• A view that opposes foreign investments.

• A strategy to avoid international production.

• A model that emphasizes the importance of location-specific advantages in FDI.

• A theory explaining the benefits of licensing over FDI.

What is the Radical View regarding Foreign Direct Investment (FDI)?

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What are the benefits of FDI for a developing country?

• Negative employment effects and capital outflows.

• Loss of economic independence and control over key decisions.

• Outward flow of foreign earnings and learning valuable skills.

• Adverse effects on the balance of payments and competition.

What is one of the costs of Foreign Direct Investment (FDI) for a developing country?

• Employment Effects

• Effects on National Sovereignty and Autonomy

• Adverse Effects on Competition

• Resource-Transfer Effects

What is one of the government policies on FDI for the host country?

• Encouragement of Outward FDI

• Restricting Inward FDI

• Encouragement of Inward FDI

• Restricting Outward FDI

What is the Free Market View regarding FDI?

• It supports the idea of FDI as a tool for exploiting host countries.

• It believes in distributing international production based on comparative advantage.

• It considers MNEs as instruments of imperialist domination.

• It advocates for pragmatic nationalism in FDI policies.