Page 150 - DMGT545_INTERNATIONAL_BUSINESS

Unit 7: Foreign Direct Investment

7.9 review Questions notes

1. What is international investment or foreign investment? What are the basic facts which
help in distinguishing foreign direct investment and foreign portfolio investment (FPI)?
2. Discuss the benefits of FDI to the home court and to the host country.
3. What are the factors affecting international investment? Discuss four E’s of international
investment.
4. What is FDI? State and explain the factors that influence FDI.
5. Why do countries want FDI?
6. Explain Eclectic Theory and internationalization theory of international trade.
7. Discuss the global trends of FDI. What are new developments in FDI policies?

8. Explain Indian foreign investment policy. What measures have been adopted to attract
FDI?
9. What are the major incentives for developed countries to invest in developing countries?

10. What are the advantages and disadvantages of FDI as compared to a licensing agreement
with a foreign partner?
11. Recently, many foreign firms from both developed and developing countries acquired
high tech US firms. What might have motivated these firms to acquire US firms?
12. Japanese MNCs such as Toyota, Toshiba and Matsushita made extensive investment in
South East Asian countries like Thailand, Malaysia, Indonesia and India. In your opinion,
what forces are driving Japanese investments in these regions?
13. Inward FDI is bad for (a) A developing economy and (b) A developed economy and should
be subjected to strict controls! Discuss.
14. Compare and contrast these explanations of horizontal FDI: the market imperfections
approach, Vermon’s product life-cycle theory, and Knickerbocker’s theory of FDI. Which
theory do you think offers the best explanation of the historical pattern of horizontal FDI?
Why?
15. Compare and contrast these explanations of vertical FDI: the strategic behaviour approach
the market imperfections approach. Which theory do you think offers the best explanation
of the historical pattern of vertical FDI? Why?

answers: self assessment

1. Imperfections

2. Economic
3. Vertical
4. John Dunning
5. Imperfections

6. (e)
7. Resource transfer effects, employment effects, Balance of payment effects, effect on
competition and economic growth
8. Capital, technology, management resources

lovely Professional university 145