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Your assignment is to prepare and submit a paper on potential risks and advantages of investing in foreign subsidiaries.
Your assignment is to prepare and submit a paper on potential risks and advantages of investing in foreign subsidiaries. FDI has many advantages especially in the manufacturing sector because it leads to the uniting of capital, technology, and managerial and marketing skills. Most emerging countries are deficient in technological capability and FDI would facilitate technology transfer and trim down the technology gap between developing countries and industrial countries. According to Blomstrom (1989) “it is suggested that spillovers or the external effects from FDI are the most significant channels for the dissemination of modern technology.”
Rugman (1982) states that “foreign direct investment (FDI) is the ownership and control of foreign assets. In practice, FDI usually involves the ownership, whole or partial control of a company in a foreign country. This is called a foreign subsidiary.”
The determinations of former experimental reports depict that investment in foreign subsidiaries involves the political risk of the host country. Political menace is conceived to be the most vital component to be considered while investing in a foreign subsidiary. This is because of the principle that irregularity and instability in the political environs of the host market augment the apparent risk and insecurity felt by the firm Lewis (1979).
Quite a lot of learners (Fatehi - Sedeh and Safizadeh, 1989. Formica, 1996. Kobrin, 1979. Robock, 1971. Sethi and Luther, 1986) arrogated that there is no one cosmically consented explanation of political risk. It is most normally believed in terms of (normal host) government hindrance with business functioning. When executives from various multinational corporations were interviewed they all had the same thing to say. They stated that political upshots were one of the most crucial factors with reference to foreign investment decisions (Aharoni, 1966. Basi, 1963. Bass et al., 1977. Schollhammer, 1974). The executives particularly cited that the steadiness of the host government and the approach of the host government towards investment in a foreign subsidiary was the most significant reflections in the investment decision. .
