Capital, Technology, Management Approach
Capital, Technology, Management Approach
Capital, Technology, Management Approach
Capital, Technology, Management Approach
Capital, Technology, Management Approach
Capital, Technology, Management Approach
Capital, Technology, Management Approach
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In order to find out the contribution towards foreign trade investment, a definitional equation can be established as follows:
FDI = C + T + M, where,
FDI stands for Foreign Direct Investment,
C stands for capital,
T stands for technology and
M stands for management
Foreign direct investment is much more than international capital movement. In fact, actual movement of funds may not, necessarily, take place in a situation of foreign direct investment. Normally investors fail to take money with them when they go abroad to take control of any company or business group for absorbing the same into their multinational fold.
Instead in case of need, and to the extent of the need, these acquisitions can borrow in the local capital market unless such market has little depth or is depressed otherwise. Even if capital movements do take place, these may be, over a certain period, only gross and not net.
That is on account of the constraint of exchange fluctuations and other considerations, MNCs may try to balance their outflows (acquisition of assets abroad) by their inflows (increase in liabilities). Investment may, as well, take place in kind through the exchange of property (patents, technology or machinery) against equity claims, without the normal transfer of funds through the foreign exchange mechanism usually associated with international capital movements.
Reinvestment of the profits earned by Multinational companies in host countries may be another form of direct investment with no movement of funds through the foreign exchange market.
There may also be in evidence some trickling down investment. In particular, there may be a chain of capital movements, say from high income (developed) countries to middle income (semi developed) nations and from the latter to low income (less developed) countries. Such a chain may operate even within less developed countries – LDCs depending on their relative size, expertise in multinational business and ambition for politico-economic leadership.
A country rather weak in C (capital) but strong in T (Technology) and/or M (Management) may also be impelled to make direct investment in more affluent countries having higher per capital income, a great deal of export surplus and large mass of accumulated wealth.
Some oil-rich countries rather weak in T and M can be cited as examples
Thus with foreign direct investments, as distinguished from other forms of international capital movements, T and M may turn out to be more important than C.
This is on account of the facts that MNCs are eager to retain control over the projects for which they provide crucial inputs of T and M, however, for this purpose, some C usually in the form of equity investment is called for, unless the whole exercise is a pure consultancy assignment.
FDI = C + T + M, where,
FDI stands for Foreign Direct Investment,
C stands for capital,
T stands for technology and
M stands for management
Foreign direct investment is much more than international capital movement. In fact, actual movement of funds may not, necessarily, take place in a situation of foreign direct investment. Normally investors fail to take money with them when they go abroad to take control of any company or business group for absorbing the same into their multinational fold.
Instead in case of need, and to the extent of the need, these acquisitions can borrow in the local capital market unless such market has little depth or is depressed otherwise. Even if capital movements do take place, these may be, over a certain period, only gross and not net.
That is on account of the constraint of exchange fluctuations and other considerations, MNCs may try to balance their outflows (acquisition of assets abroad) by their inflows (increase in liabilities). Investment may, as well, take place in kind through the exchange of property (patents, technology or machinery) against equity claims, without the normal transfer of funds through the foreign exchange mechanism usually associated with international capital movements.
Reinvestment of the profits earned by Multinational companies in host countries may be another form of direct investment with no movement of funds through the foreign exchange market.
There may also be in evidence some trickling down investment. In particular, there may be a chain of capital movements, say from high income (developed) countries to middle income (semi developed) nations and from the latter to low income (less developed) countries. Such a chain may operate even within less developed countries – LDCs depending on their relative size, expertise in multinational business and ambition for politico-economic leadership.
A country rather weak in C (capital) but strong in T (Technology) and/or M (Management) may also be impelled to make direct investment in more affluent countries having higher per capital income, a great deal of export surplus and large mass of accumulated wealth.
Some oil-rich countries rather weak in T and M can be cited as examples
Thus with foreign direct investments, as distinguished from other forms of international capital movements, T and M may turn out to be more important than C.
This is on account of the facts that MNCs are eager to retain control over the projects for which they provide crucial inputs of T and M, however, for this purpose, some C usually in the form of equity investment is called for, unless the whole exercise is a pure consultancy assignment.
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