Chapter 11 - The many forms of international investment. After completing this chapter, students will be able to: Detail the principal types of international investment flows and their recent growth, discuss the reasons why firms operate in more than one country and become MNEs, show how portfolio investment has grown in recent decades as governments liberalized investment flows and financial markets have developed,. | The Many Forms of International Investment The international integration of capital and commodity markets goes further and runs deeper now than ever before. (Michael Bordo, Barry Eichengreen, and Douglas Irwin) The Goals of this Chapter Detail the principal types of international investment flows and their recent growth. Discuss the reasons why firms operate in more than one country and become MNEs. Show how portfolio investment has grown in recent decades as governments liberalized investment flows and financial markets have developed. Explain international banking and the growth of the eurocurrency markets. Discuss foreign aid and the reasons why developed country governments have reduced their foreign aid transfers. Multi-National Enterprises (MNEs) MNEs are involved in over three-fourths of all international trade. MNEs account for a major portion of international investment. MNE investments are categorized as Foreign Direct Investment (FDI). There is extensive evidence that FDI is the international investment most likely to facilitate international technology transfers. Vertical and Horizontal FDI Foreign direct investment undertaken by MNEs is often classified as either vertical and horizontal. Vertical FDI implies that an MNE owns facilities that fit into different stages of the supply chain. Horizontal FDI, on the other hand, consists of MNE investments that duplicate facilities and operation in several countries. Among the reasons for the growth of MNEs are: It can be less costly to internalize transactions within a business organization than to deal with outside firms. Proprietory knowledge is often best exploited in-house. By expanding overseas, economies of scale can be exploited. Reputations can be exploited in more than one market. Trade restrictions can be avoided by producing overseas behind tariff walls. Among the reasons for the growth of MNEs are: Taxes and regulations induce business to move activities across borders. Exchange rate risk inherent | The Many Forms of International Investment The international integration of capital and commodity markets goes further and runs deeper now than ever before. (Michael Bordo, Barry Eichengreen, and Douglas Irwin) The Goals of this Chapter Detail the principal types of international investment flows and their recent growth. Discuss the reasons why firms operate in more than one country and become MNEs. Show how portfolio investment has grown in recent decades as governments liberalized investment flows and financial markets have developed. Explain international banking and the growth of the eurocurrency markets. Discuss foreign aid and the reasons why developed country governments have reduced their foreign aid transfers. Multi-National Enterprises (MNEs) MNEs are involved in over three-fourths of all international trade. MNEs account for a major portion of international investment. MNE investments are categorized as Foreign Direct Investment (FDI). There is extensive evidence that FDI .
