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Multinational Corporations and Foreign Direct InvestmentAvoiding Simplicity, Embracing Complexity$
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Stephen D. Cohen

Print publication date: 2007

Print ISBN-13: 9780195179354

Published to Oxford Scholarship Online: May 2007

DOI: 10.1093/acprof:oso/9780195179354.001.0001

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 Why Companies Invest Overseas

 Why Companies Invest Overseas

Chapter:
(p.117) 6 Why Companies Invest Overseas
Source:
Multinational Corporations and Foreign Direct Investment
Author(s):

Stephen D. Cohen

Publisher:
Oxford University Press
DOI:10.1093/acprof:oso/9780195179354.003.0007

The seemingly simple explanation of why a company invests overseas — to seek greater profits — is inadequate to provide satisfactory insight into the multiple rationales for establishing foreign subsidiaries. The omnipresence of heterogeneity and complexity as well as the need for disaggregation reappear as underlying themes as this chapter outlines the major academic models and theories as to why companies would accept the costs and risks of seeking to operate in foreign markets with alien cultures, often in direct competition with established local competitors. The bulk of the chapter is devoted to an extensive and unique list of “real-world” business and economic reasons that have caused FDI to be attractive to a growing number of companies in a growing number of countries. The concluding section is a case study of the automobile industry, a sector that can be used to illustrate a large number of the reasons for doing business on a multinational basis as previously discussed.

Keywords:   competition, licensing, ownership advantage, economies of scale, fixed costs, product life-cycle theory, eclectic paradigm, automobile industry

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