In Recent Time, Outward Fdi Has Been Significantly Increased from China and India. Discuss the Factors Responsible for Such a Growth. Do You Think Ib Theories (Oli and Idp) Adequately Explain the Reasons for Outward Fdi

According to Moosa (2002), “Hymer (1976) organized the industrial organization hypothesis. Kindleberger (1969), Caves (1982) and Dunning (1988) further explained the hypothesis. This theory assumes that the firms when it establishes an enterprizes in another country it suffers from many disadvantages in comparison to local investors. The cultural aspects, languages, legal system and other factors play an important role in determining FDI. But there is increase in FDI. The theory explains about why firms invest in foreign countries. But the theory fails to explain the motivation for choosing the locations. This theory explains the expansion of FDI is due to capital, management, technology, marketing, and access to raw materials, economies of

Figure 1.7 The structure of the dissertation Figure2.2 Modes of entering foreign markets Table 2.32 Factors affecting the FDI decision Figure 2.33 Types of FDI 12 15 19 22

FDI allows the home country to invest into the host country to produce, advertise, and distribute products, in order to upsurge their market share and provides a long-term investment and enhancement. (Moosa, 2002)

FDI can be defined as a process whereby an investor places money into a business overseas, therefore implying that the investor now has a certain level of control over the foreign business that was purchased (OECD 2008). Due to the vast size of MNCs, it is common for an investor to purchase a section of an overseas MNC as they may wish to expand their own company and branch out (OECD 2008). However, it is also common for the MNC itself to participate in FDI by investing in an overseas company, as again they may wish to expand the size of their corporation and increase their scope and tenancy (OECD 2008). It is therefore

the theories of FDI; section two will discuss the cases of both firms‘ strategic changes;

303). In the passage, three economists (Wei, Zheng and Sinha) used data to explain the FDI flows of India and China. For example, Wei (2005) tested for possible factors which are crucial in explaining FDI flows. Zheng (2009) established India and China data sets to calculate the flows individually. Sinha (2007) selected data from 6 states in India and 3 sub-regions in China to estimate how the business climates influence FDI inflows (as cited in Prime, Subrahmanyam and Lin, 2011, pp. 304-305). Others cared about investment regimes, or focused on the differences in policies and performance in the two countries (Prime, Subrahmanyam and Lin, 2011, pp. 305-306).

Foreign direct investment (FDI) can be defined as a process whereby residents of one country (the source country) acquire ownership of assets for the purpose of controlling the production, distributions and other activities of a firm in another country (the host country). FDI also have another definition like ‘an 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’- International Monetary Fund’s Balance of Payment Manual and ‘ an investment involving a long-term relationship and reflecting a lasting interest and control of a resident entity in one economy (foreign

FDI is defined as cross-border investment by a resident entity in one economy with the objective of obtaining a lasting interest in an enterprise resident in another economy. The lasting interest implies the existence of a long-term relationship between the direct investor and the enterprise and a significant degree of influence by the direct investor on the management of the enterprise. Ownership of at least 10% of the voting power, representing the influence by the investor, is the basic criterion used. (OECD Factbook 2013: Economic, Environmental and Social Statistics) Foreign direct investments were prohibited in India prior to 1991. Liberalization was introduced in 1991 which allowed for FDI. Defense, petroleum & gas, banking, airline, telecom, single brand retail, and multi-brand retail are fields investors can enter after obtaining approval. Below we see the investment caps for each industry (EY).

In 2009, China attracted $95 billion FDI inflows, accounting for 1.9 percent of its GDP compared with India’s $36.6 billion inflows, equivalent to 2.7 percent of its gross domestic product. China attracted 2.5 % more FDI’s than India in the year 2009.India’s FDI inflow dropped by 14 percent in 2009 and that of China by 12 percent. India should improve its infrastructure as well credibility of the government to attract FDI’s. India is a vast country with many natural resources including metals, minerals and oil deposits. English speaking ability gives edge over China to improve its service sector. India should sustainably increase it’s invest on infrastructure to attract more FDI’s. Foreign investors, who could invest their money anywhere, find more opportunities and less obstacles in China. (Zhou Siyu, 2010)

Outside prompt endeavor (FDI) is consistently contributing in the valuable improvement toward the economy of one country in light of the hypothesis by another country or country 's personnel 's. The reasonability and adequacy of Global economy depends on the theorist 's perception, if wander seen with the inspiration driving long terms enthusiasm for the social-judicious change then it is said that the hypothesis contributes completely towards overall economy, in case it is transient with the deciding objective of making advantage then it may be less tremendous than that whole deal and disinvestment leads negative effect. The FDI may moreover be impacted due to the regulatory trade preventions and methodologies for the remote ventures and prompts less or more fruitful toward responsibility in economy furthermore GDP and GNP of the country.

In today’s world of investment, every country, every region, competes for foreign direct investment; however, they do so disproportionately - one thing is for sure: The more FDI, the better. FDI flows generally follow investor’s choices, interests, and perceptions. The need to earn more creates new opportunities for investors and nations alike. But

FDI is where the MNE invests directly in production or other facilities over which it has effective control in a host economy (j &t). According to Pollan (), the definition of the terms “investment” is highly significant to Foreign Direct Investment, which can be typical comprehend as the conveyance of capital to a country. Investment can be defined as money committed or property acquired in order to gain profitable returns, as interest, future income or appreciation in value (business dictionary, 2014). The commonest definition used to understand the idea of FDI is the definition provided by International Monetary Fund’s (IMF). The IMF definition of FDI introduces systems and structures which clearly demarcates foreign direct investment from portfolio investment. According to the IMF, direct investment creates a lasting interest in an enterprise, consisting of a long-term relationship between the investor and the enterprise and that the investor has an outstanding amount of control on the management of the enterprise, while portfolio investment does not create an extended relationship and the portfolio investor is rarely directly partaking in the day-to-day management of the enterprise (Pollan,). FDI however has no comprehensive, authoritative and ubiquitous legal definition and the test for the existence of enough degree of control differs in scope depending on applicable law in a

The companies mainly focuses of their innovation, strategic management and organizational structure to expand their business in international level.According to the United Nations Conference on Trade and Development (UNCTAD, 2013), the outward foreign direct investment (OFDI) by firms from these economies accounted for 30.6% of the global (OFDI) flows, which was $1.39 trillion in 2012.The above statement is a crystal clear proof that emerging economies like China, Brazil, Russia and India are working towards the restructuring of their international business. MNC’s from emerging economies, although diverse, have displayed some common characteristics that differ from their counterparts from developed countries (Xueli Huang, 2015).Emerging economies lack so many aspects like the know-how of that particular industry, the technology required by these business enterprise, but in spite of all the lack of primary resources they have cherished because the home government of emerging economies plays a vital role in helping to get the resources for them to expand the business.

After IMF and World Banks involvement India took steps towards liberalization and privatization to reform India’s economy. Lowered tariff levels, reformed exchange rate policy, liberalized industrial licensing policy and also relaxed India’s foreign direct investment (FDI) policy. These reforms opened the doors for multinational corporations to invest in India. India received positive responses from international investors. Before the 1991 reforms, foreign equity ownership was restricted to 40 percent and the transfer of technology was necessary to do business in India. These barriers were removed for foreign companies. Many multinational corporations (MNCs) took advantage of India’s new economic policies and increased their stakes to more than 51 percent in their subsidiaries resulting in a several fold increase in foreign direct investment in just three years (Gosai, 2013).

Foreign direct investment (FDI) is created when a company buys assets in foreign country and invest in foreign countries property, plant or equipment, and also the participation a joint venture with a foreign local company. In addition, when a company begins FDI, the company will become a multinational company. Foreign direct investment has been spreader significantly in the previous two decades through the world economy. More and more countries and sectors has constitute to become one of the international foreign direct investment network. An important force creating better global economic combination are represented by different types of FDI. (Mody, 2004). In the following discussion, there will be reasons why China remained