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Foreign direct investment (FDI) has become the prime engine to foster growth and to facilitate the restructuring and internationalization of formerly sheltered areas during the 1980s. This book deals with future prospects for FDI and provides answers to some critical questions at the beginning of the 1990s: Will the unprecedented high rate of growth of FDI in the 1980s continue for the rest of the twentieth century and beyond? If so, which will be the major recipient countries, source countries and sectors involved in these transactions? The general approach of each chapter is to review the factors that prompted the expansion of FDI during the 1980s. Their value as driving forces in the future is then assessed together with some new factors. The book contains nine chapters. The first four deal with general issues such as: Will the restrictions on capital flows be reimposed? What are the prospects for the world economy? Which ingredients will shape the global competition for investment? What are the likely patterns of FDI to emerge in the next decade? The remaining five chapters are devoted to special issues such as: How will increased instability in the financial system influence trade and FDI? What role in future FDI will merger and acquisition (M&A) activities play? What influence will the emerging market economies have on the global distribution of FDI? Will the Japanese continue to be the major foreign direct investors in the future? Will FDI from small and medium-sized firms gain momentum as they become more exposed to international competition and as their customers get increasingly involved in FDI?

Inhaltsverzeichnis

Frontmatter

Introduction

Abstract
Foreign direct investment (FDI) has become the prime engine to foster growth and to facilitate the restructuring and internationalization of formerly sheltered areas during the 1980s. This book deals with the future prospects for FDI and provides answers to some critical questions confronting us at the beginning of the 1990s: Will the unprecedented high rate of growth of FDI in the 1980s continue for the rest of the twentieth century and beyond? If so, which will be the major recipient countries, source countries and sectors involved in these transactions?
Lars Oxelheim

Chapter 1. Foreign Direct Investment and the Liberalization of Capital Movements

Abstract
In the 1980s a surge of foreign direct investment (FDI) occurred on a global scale with the total value of inflows reaching about USD 185 billion in 1989.1 The growth came about at an unprecedented high rate during the latter part of the 1980s and the inflow of 1989 was three to four times the average flow in the first half of the decade. The average annual growth rate between 1985 and 1990 was 34 percent. However, growth was rather unevenly distributed. The developing world experienced a drying-up of inflows and its share of global flows fell from an annual average of about 24 percent in 1975–79 to about 14 percent in 1985–89.2 At the same time, successful economies in Asia siphoned the flows away from the heavily indebted countries in Africa and Latin America. The bulk of the increase in FDI flows in the latter part of the 1980s took place almost entirely between developed countries, with a heavy concentration in the countries of the Triad: the United States, the European Community and Japan. In the aggregate, direct investment flows amounted to well over 1 percent of GNP in fourteen major industrial countries by 1989, compared to about.5 percent of GNP in the early 1980s.3 Since this increase is higher than that for gross domestic investment, it can hardly be attributed entirely to cyclical factors.4
Lars Oxelheim

Chapter 2. Prospects for the World Economy

Abstract
There are important economic factors that point to stronger economic growth in the 1990s than during the last 15–20 years. But I need hardly stress that there is great uncertainty. Our knowledge of how the economic system is functioning is incomplete. In addition to the uncertainties related to economic factors discussed later, it is difficult to assess the implications of the political upheavals of the last few years. The liberation of the Eastern European countries, the breakdown of the Soviet Union, the advance of islam, and the possible proliferation of nuclear weapons may contribute to political, ethnic and religions conflicts and create new security problems. These conflicts and problems may in turn affect economic developments. In the following, however, I have assumed that political factors will not exert major adverse effects on the world economy.
Kjell Andersen

Chapter 3. The International Competition for Investment

Abstract
Since the industrial revolution, countries have been in an international competition for investment, whether or not they know it or consciously adopt the policies that have such large influence on the competition’s outcome. Part of this competition is for domestic investment and part for foreign investment; in the present world of high and growing interdependence and integration among industrialized countries, the two types of investment often go together. Policies favorable for domestic investment very often attract foreign direct investment (FDI); similarly, policies that make domestic investment unattractive often discourage inward FDI and encourage outward FDI as home companies and residents look abroad for better uses of capital.
Richard J. Sweeney

Chapter 4. International Direct Investment Patterns

Abstract
Let me begin on an optimistic note. This last decade of the 20th century promises to offer more opportunities and challenges for cross-border direct investments and cooperative ventures than any of the others which preceded it. Indeed, the 1990s may well see the maturing of the global economy, the emergence of which began in the 1960s, faltered in the 1970s, and was resuscitated in the 1980s.
John H. Dunning

Chapter 5. The Instability of the International Financial System and Its Implications for Trade and Investment

Abstract
The topic is the instability of the international financial system and its implications for trade and investment. This is a very vast and difficult subject, but recognizing its significance is important. Due to its nature, the thrust of the paper must be in identifying the relevant issues. While the literature on various aspects of the subject is extensive, the very volume attests to the fact that definite answers are few, and those that exist are contested. Nevertheless, an increase or decrease in instability represents an important strategic forecast. It affects the actions of companies as well as individuals to arrange their affairs in such a way as to minimize the effect of instability. This includes the possibility of a reduction in the scope and volume of economic activity, i.e., economic growth. The significance of these matters justifies even a degree of speculation that goes beyond conventional economic analysis.
Gunter Dufey

Chapter 6. The Role of Mergers and Acquisitions in Foreign Direct Investment

Abstract
Global and regional interpenetration of markets during the 1970s and 1980s led to a great deal of industrial restructuring among developed as well as developing countries. Trade liberalization under the auspices of the GATT, in particular the Kennedy and Tokyo rounds of multilateral tariff cuts and establishment of codes of conduct on non-tariff barriers, helped to remove a broad array of trade distortions applied at the customs checkpoints of the industrial countries—to a large extent on a most-favored-nation basis. At the regional level, the EC economic integration of the 1960s and 1970s and its recommitment in 1985 through Single European Act, as well as the Canada-U.S. free trade pact, contributed a further freeing-up of markets, even as complementary monetary developments based on a broad-based removal of exchange controls liberalized international payments.
Ingo Walter

Chapter 7. Foreign Direct Investment in Emerging Market Countries

Abstract
The purpose of this chapter is to suggest plausible patterns and trends in foreign direct investment flows to ”emerging economies” during the remainder of the 19905.1 As a basis for developing the forecasts, the chapter examines data on FDI flows during previous decades, especially during the 1980s. Most of the analysis is in terms of aggregate national-level FDI flows, but there is also some industry-level data. The analysis does not develop a formal econometric forecasting model, though it does utilize the results of previous theoretical and empirical studies of the determinants of FDI. The analysis includes economic and political determinants of FDI-at both the macro-level and micro-level. The analytic approach is thus interdisciplinary and multi-level.
Thomas L. Brewer

Chapter 8. The Role of Japanese Foreign Direct Investment

Abstract
Business operations have generally become more internationalized in recent decades. There has also been a widening of the national origin of so-called multinational enterprises, which own and control productive assets in more than one country. Such firms used to emanate almost entirely from Western Europe and North America. The dominance of westerners is now being challenged particularly by the rise of Japanese multinationals, which rapidly expand their activities in all major markets. Their efforts are not reciprocated by western firms, and the Japanese home market remains relatively untouched by foreign-based corporations. In fact, the Japanese are becoming dominant in East Asia as a whole, which is the fastest growing region in the world.
Thomas Andersson

Chapter 9. Globalization and the Future Role of Small and Medium Sized Enterprises

Abstract
A significant characteristic of ”industrial organisation” in the postwar era, especially up to the 1980s, is the establishment of large international firms designed to mass-produce standardized goods. For a number of reasons, traditional wisdom has regarded production by smaller units as inferior, with small firms being expected to more or less wither away. However, since the beginning of the 1970s the increasing role of small and medium-sized enterprises (SMEs) in terms of employment and value added has prompted a revaluation of the importance of SMEs.1
Pontus Braunerhjelm

Backmatter

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