Monday, March 30, 2009

reasons for international Movements of capital (4)

7-firms also argue that they need to invest abroad for defensive purposes to protect market share.firm A,for example ,reasons that it needs to begin production in the foreign market location in order to preserve its competitive position because its competitors are establishing plants in the foreign market currently served by A is exports or because firms in the host country are producing in larger volume and competing with A is goods.
8- Finally ,foreign firms may find investment in a host country to be profitable because of some firm-specific knowledge or asset that enable the foreign firm to outperform the host country is domestic firms .Superior management skills or an important patent might be involved .At any rate,the opportunity to generate a profit by exploiting this advantage in new setting in a new setting entices the foreign firm to make the investment .
A considerable amount of further empirical research is needed in order to determine the most important causes of international capital mobility ,and different reasons will apply to different industries ,different periods,and different investors .for examples of econometric work that has been done on the causes of foreign direct investment.

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