Sunday, September 8, 2019

Why do companies decide to invest overseas and to go multinational Assignment

Why do companies decide to invest overseas and to go multinational - Assignment Example Jepson (2002) explains the unprecedented flow of foreign direct investments during the last two decades has made spectacular contributions to the economic restoration of Europe and to the industrialization of many of the developing countries. Spectacular, too, have been the returns realized by the international corporations that undertook the investments. However, if we examine the conditions a host country must satisfy if it is to continue attracting foreign investments, quite distinct limits to a country's ability to keep its doors open to the foreign investor become apparent. A few basic facts will make the point. (McLaughlin Mitchell 2006). Barry (2002) defines that the most fundamental fact is this: A country's capacity to absorb foreign direct capital inflows is ultimately limited by its ability to service that capital, in terms of current account debits (e.g., dividends) and eventual repatriation of principal. In turn, a country's ability to service the stock of foreign-owned capital is tied to its ability to generate sufficiently large payments surpluses on other current account items. (Relying on a positive balance in the capital accounts is just putting off the day of reckoning.) These relationships are obviously more easily stated in the aggregate than conclusively sorted out in detail. The "current account" of a country's balance of payments has many components, and "foreign-exchange availabilities" come from many sources.

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