Interestingly, according to some researchers Sinanagic, Civic, and Kamaric, , actions taken by government agencies to improve home environment to minimum international standards results in attraction of more foreign direct investment. In this sense, especially in developing countries, public money should be first used to improve infrastructure, to reduce corruption, to develop corporate finance, to educate people and prepare knowledgeable and skillful workers rather than trying to promote the country by marketing and struggling for creating advertising campaigns for this. Confirming this idea, Brossard also empirically proves that although OIP Investment Promotion Organization has an essential role in foreign direct investment, it is anyway not a significant factor to give a priority.
More specifically, the information and data services based on the key location provided by the OIP offer the most for investor needs and it was discovered that small investors also support the staff. According to Mucchielli , FDI strategy proposed is the use of different countries to attract national institutions and to promote investment. According to the author, these institutions have three objectives: to improve the image of the host country in the international investment community;Access local and foreign investors; provide a range of services like hospitality for potential investors and effective capacity building.
To achieve these objectives, variety of media, advertising, trade fairs, tele-marketing should be approached and implementation process should be well monitored.
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On this issue, Kalamova and Conrad found that difference between actual picture of a country and a stereotype about the country also has impact on foreign direct investment flows. If a US company wants to produce a product with high quality for European market, there is a high probability that Germany will be considered when compared with other countries. Finally, according to several authors Johnson, Toledano, Strauss, and James, , Mayer and Mucchielli ; Thomas, ; , there is a powerful national competition to attract foreign investment, particularly, within the European Community.
Dunning notes even a competition within the same country or region to attract FDI. According to Dunning , different incentives are required to attract different types of investments. Similarly, the determinants of investment vary across different business types, one that led to the export of natural resources put less emphasis on the local market scale. Shaver identified several elements which impact the choice of US foreign direct investment location. These factors include: the state position of the coastal part, the low level of trade unions, and fewer legal restrictions, lower levels of economic activity, taxes and subsidy of international activities.
A study of foreign direct investment in USA ascertained that a presence of other Japanese companies in the country will attract other Japanese firms to invest Kotabe, Contrary to prior studies Blonigen suggests that the tax is an insignificant determinant of FDI. The institution quality, especially in less developed countries is considered to be an important determinant.
Weak legal protection and increased country risk corruption, land costs, etc.
In addition, the author mentions direct relationship between weak institutions and poor infrastructure along with reduced profitability. Other key elements are tariff barriers and the existence of foreign subsidiaries which create an export substation effect. Clusters also play a key role in attracting FDI. Cooperation of various companies which form business groups within the same industry generates various advantages, such as information exchange and the reduction of implementation and operation.
This phenomenon can be linked with the mimicry concept explored Kotabe Francis and Zheng identified nine levels of pressure called isomorphic pressure Figure 1 , which may lead to the selection of foreign direct investment. These pressure levels can be mandatory or regulatory and imitate the host country, industry or company.
It is also important to note that foreign direct investment can occur in the context of relocation activities. On this issue, Birkinshaw, Braunerhjelm, Holm and Terjesen identified several factors which affect the relocation of the corporate headquarters and influence in attracting FDI. According to the authors, creating an attractive place is based on two main factors, namely industrial agglomeration and creating a favorable business environment. The author explores the characteristics of the different elements that enable a favorable business environment, including the level of competition in the industry and among competitors, the presence of a quality relationship between policies and government policymakers and also business providers close to the financial sector banks and investors.
The Dual Perspective on FDI attraction phenomenon considers two main factors that are multinationals and host location. On the one hand, the government is under pressure to achieve significant objectives such as economic development and job creation. A way to achieve these goals is to attract foreign direct investment. Therefore, the government can focus on strategy formation factors that are conducive to attracting foreign direct investment.
Firstly, a business environment must be welcoming and favorable for FDI.
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Multinationals have also been encouraged to take advantage of foreign direct investment in foreign markets as a means of implementing various pressure levels. Finally, meetings of government leaders and investment firms can facilitate the involvement of a third actor.
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In this way the development of contacts between multinational companies and home environment of local government which forms a strategy is ensured. In all countries, foreign direct investment FDI is recognized as a significant factor for adding value to the economies and is affiliated with companies which depend on multinationals to invest in order to achieve the objectives of economic growth. For all world cities to attract inflows of foreign direct investment, government officials on all levels and relevant departments should make every effort to encourage local residents to attract investors.
Foreigners hoping to settle in the national companies are not enough to attain sufficient levels of FDI. In addition, the details of the company website should communicate attractive features of the city or country who wishes to attract businesses. Consequently, this would enable companies to attain a advantageous international position and make effective investment decisions in countries around the world.
In this context, a number of theories and methods have been developed and information has been provided on the process of internationalization of companies and businesses.
Foreign Direct Investment | Strategies and Determinants of FDI
For instance, firm experience, reducing the time from the perspective of psychological processes and learning functions are all relevant factors Casillas and Acedo, ; Johansson and Vahlne, ; Johnson and Wiedersheim Paul, ; Kogut, ; Vahlne, Ivarsson, and Johnson, Another theory which takes an analytical approach in explaining FDI is the resource-based theory. It focuses on financing of international business development and resource management Mutinelli and Piscitello, Finally, the behavioral approach of competitors in the enterprise is also relevant Aussilloux, This means that the attractiveness of the strategy to utilized to attract foreign direct investment should be considered.
When forming a strategy for attracting FDI all these theories should be applied in order to take the necessary steps to meet the requirements and conditions of the strategic relationship position which can help resource mobilization and national economies. In some countries policies and strategies for FDI attainment are clearly defined and are aimed to promote the establishment of a secure and effective system.
The most effective strategy chosen by the country consists of qualification stage, where company that fulfills the requirements in terms of technology quality and technical features, and capital. Next in the stand phase all useful and necessary measures to promote the realization of the next stage occur followed by the win stage where the contractor is hired that is seen as being the most effective in providing the service.
For this reason, it is necessary to have all the information on net investment provided, and sufficient staff available at any time to comply with the additional information requirements needed. In some places, the same information is found in a dozen languages of the world. They provide information on all areas and attractive investment conditions. The country offers to want to invest in exploration in order to allow the availability of resources and sufficient conditions for the validity of the investment framework which could guide the company to the opportunity for all its businesses to be operating smoothly in regard to international activities.
In this context, several million dollars are distributed yearly to vote by commercial banks to investors.
Foreign direct investment
In addition, as part of the law of attraction of foreign direct investment, and also adopting and publishing a legitimate exercise of activities carried out by companies or businesses. Inferring from the conducted review of the literature we suggest that companies can create opportunities for FDI attraction in different industries by providing relevant information sought by selected business leaders. These selected people who are also in the field must be able to attract potential investors to specific events along with wealthy investors.
Next, adequate tools for investment should be identified or created. These tools can help support the analysis, in collaboration with companies from different sectors. Furthermore, business leaders should be encouraged and subsidized to participate in international influential seminars. Finally after investment service could be created. This program would provides a special way to establish an expanding network encompassing suppliers, professionals, workers and others, who need to contact and provide solutions, and discuss the problems that foreign investors are facing.
In order to attract more investment countries need to generate a favorable investment climate. Reforms aimed at creating a climate for political decision-oriented investment play an important role in this regard. It does allow influence over the company's management, operations, and policies. For this reason, governments track who invests in their country's businesses.
The decline was due to President Donald Trump's tax cut. Since , U. Many of those investments were in Europe. They pay a one-time tax rate of Companies distributed repatriated cash to shareholders, not employees. Their countries need private investment in infrastructure, energy, and water to increase jobs and wages.
Investment in high-tech and service industries accelerates
They received 43 of worldwide investment. These global corporations' investments were for either restructuring or refocusing on core businesses. Investors seek the best return with the least risk. It reduces the effects of politics, cronyism, and bribery. As a result, the smartest money rewards the best businesses all over the world. Their goods and services go to market faster than without unrestricted FDI.
Individual investors receive the extra benefits of lowered risk. Diversification always increases return without increasing risk. Recipient businesses receive "best practices" management, accounting, or legal guidance from their investors. They can incorporate the latest technology, operational practices, and financing tools. By adopting these practices, they enhance their employees' lifestyles.
That raises the standard of living for more people in the recipient country. FDI rewards the best companies in any country. It reduces the influence of local governments over them. As the recipient company benefits from the investment, it can pay higher taxes.