ECON 101 Lecture 12: Lecture 12 - Multinational Production
Document Summary
Foreign direct investment and outsourcing: foreign direct investment (fdi) Transfer of resources and acquisition of control. So either the buying of the existing firm (acquisition), or sending capital to pump resources into them (transfer of resources: cross-border outsourcing to independent foreign firms. No direct control, likely retention of resources and core activities at headquarters. So instead of producing it as part of your own firm, you buy the part from some totally separate firm (you don"t own it) Stylized concepts of the multinational firm: stylized motives for the formation of multinationals: Ownership advantage: firms that own patents or employ workforces with specific knowledge have an ownership advantage and can export their ownership advantage through fdi. Location advantage: foreign locations offer benefits from factor-price differences, provide market access, reduce transport costs. So some advantage of physically doing it there (so maybe better resources, some reason of not crossing borders?)
