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Chapter 7

Chapter 7 Notes

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Political Science
Robert O' Brien

Chapter 7 Transnational ProductionForeign Direct Investment refers to investment made outside the home country of the investing company in which control over the resources transferred remains with the investorconsists of a package of assets and intermediate goods such as capital technology management skills access to markets and entrepreneurshipFDI entails control of business decisionsThe buyers directly control the decisions and the management of the factory Most concretely it may take the form of buying or constructing a factory in a foreign country or adding improvements to such a facility in the form of property plants or equipmentIndirect Foreign Investment aka Portfolio Investmentrefers to specific assets and intermediate products for example capital debt or equity technology which are separately transferred between two independent economic agents through the modality of the marketin this instance the control over resources is relinquished by the seller to the buyer and only financial resources are transferredthose who buy do not control decisions Presents passive holdings of securities such as foreign stocks bonds or other financial assets none of which entails active management or control of the securities issuer by the investorMultinational Corporationsone term that speaks for different things such as multinational enterprises international firms transnational corporations or transnational enterprises and global corporationschallenged by term transnational corporations because multinational suggests a merger of capital from more than one nationstate but most large international firms are owned and controlled by nationals of one country and conduct activities across bordersthe term transnational corporation more accurately reflects the fact that these firms are usually owned and controlled by nationals of one country and enter into direct production activities aboard therefore the term multinational corporation appears inappropriate and transnational corporation more accurate as these firms operate trans across borders so giving greater weight to that term than to internationalnevertheless these terms show no essential difference in the operation of the firms describedthe distinction arises from those who want to emphasize the issue of ownership and those analysts who prefer to stress the reach of these actorsall analysts would agree that the basic definition of all these terms is that it is a firm with production facilities in two or more countriesTransnational Corporationsa firm that owns and controls production valueadded facilities in two or more countries
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