UGF Lecture 1

Management > Global Firm > MNE

Own and control

Capital ownership is one way of securing control over firms in foreign locations. Another way is the licensing of a company's technology to an independent foreign enterprise, where the home company can control various aspects of the activity based on the technology. The aim is benefit the MNE and reinforce the company strategy.

The vital point in MNE theory is that many factors of production, not just capital movements, need to be considered.

Foreign Direct Investment (FDI) is a defining attribute of MNEs, which is referred to as "investment that is made to acquire a lasting interest in an enterprise operating in an economy other than that of the investor, the investor's purpose being to have an effective voice in the management of the enterprise". Control of the host firm is the central point of this argument.

Portfolio Investment - is a more short term investment, where the shareholder does not aim to directly control the firm, but wants a share of its profits. Foreign Portfolio Investment (FPI) is the buying of company shares in another another country.