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Global Business Management

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Global Business Management

Foreign Direct Investment

Terms to Know:

1. Foreign Direct Investment An investment made by a company or entity based in one country, into a company or entity based in another country. Foreign direct investments differ substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation's stock exchange.

2. Greenfield Investments
Refers where a parent company starts a new venture in a foreign country by constructing new operational facilities from the ground up. In addition to building new facilities, most parent companies also create new long-term jobs in the foreign country by hiring new employees.

3. Acquisitions and Merger A general term used to refer to the consolidation of companies. A merger is a combination of two companies to form a new company, while an acquisition is the purchase of one company by another in which no new company is formed.

4. Gross fixed capital formation
Includes spending on land improvements (fences, ditches, drains, and so on); plant, machinery, and equipment purchases; the construction of roads, railways, private residential dwellings, and commercial and industrial buildings.

5. Exporting
In International Trade, "exports" refers to selling goods and services produced in the home country to other markets. Export of commercial quantities of goods normally requires involvement of the customs authorities in both the country of export and the country of import.

6. Licensing
A business arrangement in which one company gives another company permission to manufacture its product for a specified payment.

7. Internalization theory
Explains the existence and functioning of the multinational enterprise. It contributes to understanding the boundaries of the MNE (Multinational Enterprise), its…...

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