McGraw-Hill/Irwin © 2012 The McGraw-Hill Companies, All Rights Reserved Chapter 15: Multinationals and Migration: International Factor Movements

Foreign Direct Investment (FDI) Flow definition: Flow of funding provided by investors (usually firms) to establish or acquire foreign companies or to expand or finance existing foreign companies that the investors own.  Key is sufficient ownership to control or influence the management of the foreign company. Stock definition: Total value of existing funding (equity and debt) of foreign companies that has been provided by investors that own these foreign companies.

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved Foreign Direct Investments

Multinational Enterprise (MNE) A firm that owns and controls operations in more than one country. The parent firm of the MNE is located in the home country. The home country is the source country for outward FDI. The MNE has one or more affiliates located in one or more host countries. The host country is the destination country for inward FDI.

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved Exports Plus Imports as a Percentage of GDP Figure 15.1 Major Home Countries’ Direct Investments, End of 2008 (Billions of U.S. dollars)

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved. 15-6

Why Do MNEs Exist? Inherent disadvantages of operating a foreign affiliate competing against local firms. Firm-specific advantages of the MNE, especially intangible assets. Internalization advantages in using these assets. Location factors based on resource costs and availability, customer demand, government policies, and other considerations. Oligopolistic rivalry that uses FDI in the firms’ strategies for competing.

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved Figure 2.2 The Market for Motorbikes: Demand and Supply Figure 15.2 Gross Immigration Rates into the United States, , and Canada,

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved Figure 15.3 Net Immigration into the European Union,

Copyright  2012 by The McGraw-Hill Companies, Inc. All rights reserved Figure 15.4 Labor-Market Effects of Migration