IBM 416 Lecture Notes - Lecture 6: Foreign Direct Investment, Joint Venture, Greenfield Project

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Chapter 15: Foreign Direct Investment
What are the definitions, characteristics, and examples of the following?
oForeign Direct Investment
- Strategy in which the firm establishes a physical presence abroad by acquiring
productive assets such as capital, technology, labor, land, plant, and equipment
oInternational collaborative ventures
- A cross-border business alliance in which partnering firms pool their resources and
share costs and risks of a venture
oJoint venture
- A form of collaboration between two or more firms to create a jointly-owned
enterprise
oInternational portfolio investment
-
oCorporate social responsibility
oGreenfield investment
- The firm invests to build a new manufacturing, marketing or administrative facility,
as opposed to acquiring existing facilities
oMerger
- Special type of acquisition in which two firms join to form a new, larger company
oAcquisition
- Direct investment or purchase an existing company or facility
oEquity participation
- Acquisition of partial ownership in an existing firm
oWholly owned direct investment
- Investors fully owns the foreign assets
oEquity joint venture
- Partnership in which a spate firm is created through the investment of assets by two
or more parent firms that gain joint ownership of a new legal entity
oVertical integration
- The firm owns or seeks to own multiple stages of a value chain for producing selling
and delivering a product. Ex Toyota owns some car dealerships around the world
oHorizontal integration
- Arrangement whereby the firm owns, or seeks to own the activities involved in a
single stage of its value chain Ex Microsoft acquired a Montreal-based firm that
makes software used to create movie animation
oEquity Joint Ventures
- Are normally formed when no one party has all the assets needed to exploit an
opportunity, typically the local partner contributes a factory, market navigation know-
how connections or low-cost labor
oproject-based joint venture
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