GSM Lecture 2

Management > Global Strategic Management > Comparative advantage > Hymer > Vernon > Product cycle > Buckley and Casson > Internalisation > Eclectic paradigm > Ownership advantages > Motives for FDI

Motives for FDI

(Some extra related information in Understanding the Global Firm, motives for MNEs setting up subsidiaries, lecture 8)

One way of viewing FDI is in terms of natural (unskilled workers) or created (skilled, professional workers) assets.

FDI can be either vertical (investing in suppliers, distributors, retailers) or horizontal (investing in the same type of firm).

There are a variety of motives for a firm to engage in FDI:

• Resource-seeking (location-specific)
• Market-seeking (more about responding to market need than reducing costs)
• Efficiency-seeking (choosing element in vertical FDI which will be most beneficial to the company)
• Strategic asset-seeking (created assets)
• Trade/import substituting (requiring FDI to direct trade to avoid customs etc.)

OA, LA and I

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