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Impact of motives of inward FDI on benefits perceived by foreign multinational enterprises investing in India

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Abstract

The study aims to determine the principal motives of inward foreign direct investment by foreign multinational companies in India. The study undertakes to find out the impact of motives of inward foreign investment of multinational firms on benefits as perceived by the managers. The paper uses a survey approach to collect data about motives and its impact on benefits. Statistical tools, namely confirmatory factor analysis, structural equation modeling have been used. The study found that principal motive for foreign multinational firms to undertake investment is market-seeking followed by resource-seeking and efficiency-seeking motive. The strategic-asset seeking motive does not significantly influence foreign direct investment in India. The study found a positive impact between perceived benefits and motives of inward foreign direct investment in India.

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This article first traces the changing world economic scenario for international business over the past two decades, and then goes on to examine its implications for the location of foreign direct investment and multinational enterprise activity. It suggests that many of the explanations of the 1970s and early 1980s need to be modified as firm-specific assets have become mobile across natural boundaries. A final section of the article examines the dynamic interface between the value-added activities of multinational enterprises in different locations.© 1998 JIBS. Journal of International Business Studies (1998) 29, 45–66
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This article reviews some of the criticisms directed towards the eclectic paradigm of international production over the past decade, and restates its main tenets. The second part of the article considers a number of possible extensions of the paradigm and concludes by asserting that it remains “a robust general framework for explaining and analysing not only the economic rationale of economic production but many organisational and impact issues in relation to MNE activity as well.”© 1988 JIBS. Journal of International Business Studies (1988) 19, 1–31
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This paper first sets out the main features of the eclectic theory of international production and then seeks to evaluate its significance of ownership- and location- specific variables in explaining the industrial pattern and geographical distribution of the sales of U.S. affiliates in fourteen manufacturing industries in seven countries in 1970.© 1980 JIBS. Journal of International Business Studies (1980) 11, 9–31
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This paper analyses European Union FDI flows into the CEECs at a sector level, which is currently the less studied aspect of this issue. The aim is to understand whether and to what extent FDI in different sectors reacts to the same characteristics of the host countries. The paper first presents data that summarise the trend of FDI in the CEECs and, then, regression evidence that seeks to account for differences among sectors. A statistically significant positive association has been found between FDI and market size, wage differential, the stage of the transition process and the degree of openness of the economy as well. However, a statistically significant negative relation has been found for proximity to Europe and the degree of industrial concentration. This last effect suggests that strategic motivations completely offset the benefits generated by agglomeration economies. Controlling for sector specific effects, some differences emerge. Progress towards a market economy is relevant only in scale intensive and science based sectors, while labour cost is a potential attractiveness for foreign investors in traditional labour intensive sector and in science based ones. Also market considerations, proxied by the traditional gravity approach variables, affect FDI differently, depending on the industrial sector.
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A vast empirical literature has used ad hoc linear cross-country regressions to search for the determinants of FDI. The literature is extensive and controversial. Can policy-makers use this body of research to learn anything that can help them stimulate FDI? In this paper I use Extreme Bound Analysis (EBA) to examine if any of the conclusions from the existing studies is robust to small changes in the conditioning information set. The EBA upholds the robustness of the correlation between FDI and market-size, as measured by per-capita GDP, but indicates that the relations between FDI and many of the controversial variables (namely, tax, wage, openness, exchange rate, tariff, growth, and trade balance) are highly sensitive to small alterations in the conditioning information set. I also study the distribution of the estimated coefficients of the controversial explanatory variables to rank them in order of the likelihood of their being correlated with FDI. Copyright 2001 by WWZ and Helbing & Lichtenhahn Verlag AG