MGC2120 Lecture Notes - Lecture 6: Foreign Direct Investment, Transaction Cost, Market Power
24 Sep 2018
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+ horizontal fdi: a firm replicates its home. Foreign portfolio investment (fpi): firm buys stocks, bonds of other firms in foreign market but the firm doesn"t involve in the management decision indirect investment. Firm often makes horizontal investment when it likes to get very close to the market reduce transportation cost. To interact with customers to get consumers insight, improve product quality, it can use its expertise & knowledge to get market share & competitive advantages. To avoid tariff by producing the product in the host market & give a more competitive price. + vertical fdi: a firm expands its business along its value chain. Developing countries like to invest in upstream of the value chain >< developed countries like to invest horizontally in developing countries to get access in the market: eclectic paradigm (oli model) It offers a unifying framework for determining the extent & pattern of foreign owned activities (john h.
