世界经济教学资料8.fd

1、Multinationals and migration:international factor movements,Multinationals,Factors of production can and do move between countries in amounts that are often large enough to have economic effects and to grab political attention.,Multinationals,Sensitive issues raised by MNEs - if their objectives con

2、flict with the well-being of individual countries; - if they have the power to circumvent or overwhelm national-government sovereignty;,Multinationals,Worries of LDs - being both the sources and the recipients of direct investment; - whether flowing out DI reduces exports of products and employment

3、opportunities at home;,Multinationals,Worries of LDCs - exploitation; - inadequate access to foreign capital, technology, marketing, and management skills; - whether foreigners establish undue influence and control over the local economy with DI flowing in;,Multinationals,Measures to prohibit or res

4、trict FDI - certain lines of activity including natural resources, banking, newspapers and other commuincation media, and defense industries; - regulate the local operations of foreign firms (require local participations in the ownership or management; training, locally purchased components and part

5、s, local research, or exports); - use tax policy to influence the flows of DI and the division of the investment returns btw firms and governments;,Multinationals,Measures to encourage DI - offering various forms of subsidies,Multinationals,FDI - the flow of funding provided by an investor or lender

6、 (usu. a firm) to establish or acquire a foreign company or to expand or finance an existing foreign company that the investor owns and controls; - international portfolio investment; - the agreed international standard is 10% ownership;,Multinationals,Definition of FDI - any flow of lending to ,or

7、purchases of ownership in ,a foreign firm in which the investor (usu. a firm) has (or gains) ownership of 10 percent or more of the foreign firm,Multinationals,MNEs - parent firm foreign affiliates; - home country host countries; - MNE use flows of FDI to establish or finance its foreign affiliates;

8、,Multinationals,MNE - more than the flow of FDI - foreign affiliates usu. receive only part, and often a rather small part , of their total financing from the direct investment flows; - the MNE transfers many intangible assets including proprietary technology , brand names, marketing capabilities, t

9、rade secrets, and managerial practices to its affiliates;,Multinationals,Why does FDI provide so little of the affiliates total funding? - reducing risks such as unexpected changes in exchange rates and political risk;,Multinationals,FDI : history and current patterns - flows of FDI (measuring new e

10、quity investments and loans within MNEs during a period of time); - stocks of FDI (measuring the total amount of direct investments that exist at a point in time);,Multinationals,Changes in the flow of FDI - FDI has been rising and falling, mainly rising through 20th century and into 21st century; F

11、astest growth from 19531973 - US firms, European firms ,Multinationals,Change in the direction of flows - moving away from LDCs in 1970s and 1980s; - moving into LDCs in 1990s (a few LDCs in Latin America ,Multinationals,Shift to services - sharply away from extractive industries and manufacturing a

12、nd toward services; - the composition of FDI in service also changes; from trade and financial services ,but such industries as electricity, water, telecommunications and business service becoming more prominent,Multinationals,Factors for driving FDI in services -the general move in many developed e

13、conomies away from manufacturing and toward service industries; -many services cannot be traded internationally; -many countries have liberalized their regimes governing FDI in services; -the rise of Internet-based global telecommunications networks has allowed some service enterprises to relocate t

14、heir value-creation activities to different nations to take advantage of favorable factor costs.,Multinationals,Why do MNEs exist? the eclectic approach by John Dunning - inherent disadvantages of being foreign; - firm-specific advantages (to overcome the inherent disadvantages); - location factors

15、(that favor foreign production over exporting); - internalization advantages (that favor direct investment over contracting with independent firms); - oligopolistic rivalry (among multinational enterprises);,Eclectic approach,Inherent disadvantages - do not initially have the native understanding of

16、 local laws, customs, procedures, practices, and relationships; - has extra costs of maintaining management control; - is expensive to operate at a distance, in travel and communications , and misunderstanding; - may lack useful connections with political leaders in the foreign country; -could face

17、actual or potential hostility from the foreign countrys government,Eclectic approach,Firm-specific advantages ( how to overcome the inherent disadvantages) - definition: one or more assets of the MNE that are not held by its local competitors in the host country or by any other firm in the world; -

18、including secret technology or patents, access to very large amounts of financial capital, marketing advantages, superior management techniques, and so on;,Eclectic approach,Should the firm sell to foreign buyers by exporting from its home country, or should the firm set up local production in the f

19、oreing country to produce the products that are sold to the foreign buyers? Should the firm license local firms in the foreign country to use its advantages in their own operations that serve the foreign buyers, or should the firm set up foreign operations that it owns and controls?,Multinationals,L

20、ocation factors ( FDI or export?) - all of the advantages and disadvantages of producing in the home country or in the foreign country; -four key location factors: comparative advantage; economies of scale; governmental barriers to importing into the foreign country; trade bloc; - some other factors

21、: high costs of transporting a product; government taxes and subsidies; specific tastes of foreign buyers; The answer could go either way for a specific firm and product.,Eclectic approach,Internalization advantages (FDI or license) - A license is an agreement for one firm or more foreign firms to u

22、se such assets as superior technology, a strong brand name, and better management practices, with restrictions on how the asset can be used, and with payments for the right to use the asset. - advantage of licensing: to avoid the inherent disadvantages of establishing and managing its own foreign op

23、erations; -internalization advantages: the advantages of using an asset within the firm rather than finding other firms that will buy, rent, or license the asset;,Eclectic approach,To avoid the transaction costs and risks of licensing - Negotiating the license is often costly and difficult; - The li

24、censee may not be as careful with the asset as the licenser would be; The advantages of internalization are based on : the ability of the MNEs management to set the terms for the use of the assets in its foreign affiliates. The returns to the use of the assets for the use of the assets are part of t

25、he profits earned by the affiliates; The enterprise can enforce policies to safeguard the ongoing value of its intangible assets; ? Does FDI occur to a greater extent in high-technology industries and marketing-intensive industries or in standard-technology industries and less-marketing-intensive in

26、dustries?,Eclectic approach,Oligopolistic rivalry -MNEs are large firms that often compete among themselves for market shares and profits, and they used their intangible assets which drive their FDI. -MNEs can use their decisions about foreign direct investment as part of their strategies for compet

27、ing; follow-the-leader behavior - MNEs can use FDI to try to mute competition and enhance their market power. 1. may acquire foreign firms that are beginning to challenge their international market position; 2. may set up an affiliate in the home country of its rivals;,Multinationals,Taxation of MNE

28、s profits - host-country government taxes the profits of the local affiliates ; - home-country government taxes the parent companys “local” profits earned on its own activities; - home country government usu. avoid double taxation of the foreign affiliate profits;,Multinationals,Taxation of MNEs pro

29、fits - tax rates vary across host countries; - MNEs try to minimize the total taxes that they pay; So MNE can shop around among countries and locate its affiliates in the jurisdictions of governments offering lower tax rates; -MNE can use transfer pricing and other devices to transport more of their

30、 prodits in low-tax countries, even if the profits were acturally earned in high-tax countries;,Multinationals,Transfer pricing - the setting by the company of prices (or monetary values) for things that move btw. units of the company; - including materials and components, finished products, the rig

31、hts to use technology and brand names, and financila capital;,Multinationals,Governments attitude towards price transfer - attempt to police transfer pricing to ensure that the transfer prices used btw units within a MNE are similar to the market prices that independent firms would pay to each other

32、 for similar transactions; - but deternining whether transfer prices differ from market prices is complex and costly, so MNEs usu. have some scope to use transer pricing to alter the taxes the MNEs pay (and to which countries they pay taxes);,Multinationals,MNEs and international trade - MNEs are ac

33、tually heavily involved in international trade; - about 1/3 of the worlds international trade in goods occurs as intra-firm trade; - another third involves a MNE as the seller (exporter) or buyer (importer), trading with some other firm;,Multinationals,When are trade and FDI substitutes? Can FDI com

34、plement trade? - as long as transport costs and trade barriers are low enough, FDI can be used to reduce total costs by locating different stages of overall production in different countries which leads to more trade; - but FDI and trade can sometimes be complements;,Multinationals,In the case in wh

35、ich foreign affiliates undertake the same kind of production as that of the parent firm or other affiliates, FDI and trade could be substitutes or complements . - when scale economies are less important, or when transport costs and trade barriers are higher, foreign production through direct investm

36、ent substitute for international trade;,Multinationals,The effects of this kind of FDI on trade are actually more complex; is likely to promote or complement trade. - the affiliates production of the final product requires components and materials as inputs into production; - this FDI can increase t

37、rade in final products because the affiliate improves the marketing of all of the firms products in the host country.,Multinationals,The overall relationship - Most studies conclude that FDI , on average, is somewhat complementary to international trade.,Multinationals,Would the home country restrict FDI outflows? the effect on workers and others who provide inputs into production in the home