Foreign Direct investment (FDI) and its effects on the host and home countries
Not what you're looking for?
Resource-transfer effects, employment effects, balance-of-payment effects, and effects on competition and economic growth are the major benefits a country receives from inward FDI. Three costs of FDI concern host countries, namely: 1) they arise from possible adverse effects on competition within the host nation, 2) adverse effects on the balance of payments, and 3) the perceived loss of national sovereignty and autonomy.
Respond to the following:
Discuss the benefits and costs of FDI from the perspective of a host country and from the perspective of the home country.
Purchase this Solution
Solution Summary
This solution discusses the benefits and costs of foreign direct investment. Answered in 1056 words. Seven sources cited.
Solution Preview
Foreign direct investment (FDI) is a process whereby a company produces or markets a product in a foreign country through investments in facilities. The host country is the country in which the foreign company invests. The home country is the country in which the company's headquarters is located. The benefits and costs of FDI from the perspective of the host country and from the perspective of the home country are discussed below.
RESOURCES TRANSFER EFFECTS
FDI can have a positive effect on the economy of a host country providing capital, technology and management resources. Without FDI, these resources might not materialize. These forms of resource transfers from the home country to the host country can help to stimulate the economic growth of the host country.
FDI often involves transferring modern technologies to developing countries. These technologies are typically cleaner for the environment than the technologies that are used locally, In addition, as the locals imitate these modern technologies, the economy of the host country is improved. Similarly, the host company may imitate employment practices and supply-chain practices, leading to general improvements in the economy of the host county.
From the point of view of the home country, in some cases, the home country does not transfer the most desirable resources—such as cutting-edge technology—to the host country as this may cause the home country to lose its competitive advantage.
EMPLOYMENT EFFECTS
FDI often creates employment in the host country. In these countries, capital is usually scarce, but labor is abundant. FDI directly increases employment rates in the host country by employing residents from the host country. As the employees of ...
Education
- MSc, California State Polytechnic University, Pomona
- MBA, University of California, Riverside
- BSc, California State Polytechnic University, Pomona
- BSc, California State Polytechnic University, Pomona
Recent Feedback
- "Excellent work. Well explained."
- "Can you kindly take a look at 647530 and 647531. Thanks"
- "Thank you so very much. This is very well done and presented. I certainly appreciate your hard work. I am a novice at statistics and it is nice to know there are those out there who really do understand. Thanks again for an excellent posting. SPJ"
- "GREAT JOB!!!"
- "Hello, thank you for your answer for my probability question. However, I think you interpreted the second and third question differently than was meant, as the assumption still stands that a person still independently ranks the n options first. The probability I am after is the probability that this independently determined ranking then is equal to one of the p fixed rankings. Similarly for the third question, where the x people choose their ranking independently, and then I want the probability that for x people this is equal to one particular ranking. I was wondering if you could help me with this. "
Purchase this Solution
Free BrainMass Quizzes
Transformational Leadership
This quiz covers the topic of transformational leadership. Specifically, this quiz covers the theories proposed by James MacGregor Burns and Bernard Bass. Students familiar with transformational leadership should easily be able to answer the questions detailed below.
IPOs
This Quiz is compiled of questions that pertain to IPOs (Initial Public Offerings)
Cost Concepts: Analyzing Costs in Managerial Accounting
This quiz gives students the opportunity to assess their knowledge of cost concepts used in managerial accounting such as opportunity costs, marginal costs, relevant costs and the benefits and relationships that derive from them.
Motivation
This tests some key elements of major motivation theories.
Writing Business Plans
This quiz will test your understanding of how to write good business plans, the usual components of a good plan, purposes, terms, and writing style tips.