Questions for Discussion
1. Identify two or three ways governments intervene in the Foreign Direct Investments (FDI). Are you familiar with any FDI in the Dallas FW area?
Although I am not familiar with Foreign Direct Investments in the Dallas/Fort Worth area, I am familiar with some of the ways the governments of Texas and Austin intervened in FDI to bring Samsung to Austin. The most crucial intervention a government can offer a foreign company is financial incentive. In the case of Samsung, the biggest incentive was tax abatements by the local district. This lowered the tax burden of Samsung as the built their first assembly plant outside of Korea. Often local governments will require that companies commit to a certain number of jobs at an expected pay level before they will commit to tax incentives. In this way, governments can guarantee not only the number of jobs, but the quality of those jobs.
2. Our chapter discuses several explanations as to ‘why foreign direct investment’ takes place. Pick out the chapter’s explanation you find most logical and share it with us—comment on why you have picked the specific explanation.
I manage a team of system administrators for a company based in Sydney, Australia. In effect, I work for a subsidiary of that company, and therefore, a foreign direct investment. The two reasons my company invested in a US subsidiary can both be described as “specialized knowledge.” When a company offers around the clock support, they often have a difficult time hiring for the “graveyard shift.” My company worked around that problem by hiring a team of experienced individuals that would work a normal shift during the graveyard shift in Australia. Finding a team of individuals with the level of experience of my team would have been impossible when asked to work after midnight in Sydney. Additionally, the company had attracted a few high-value US customers. These customers were beginning to chafe at the idea of waiting for workers in Sydney to wake up and come online to solve their problems. Again, my team was local and ready to help.
3. After listening/reading our media story for Lesson/chapter 7, you will have information about the level of employment in the U.S. enhanced by foreign direct investment. One of the questions always asked about FDI is, “Should the U.S. government continue to encourage FDI or not”? What if foreign direct investment offered to purchase Disney World or the Alamo? Should we allow such investments or not?
The natural concern regarding FDI in the United States is that profits from the venture will flow out of the country. That being said, there is traditionally an inflow of capital to go along with FDI. Additionally, incoming FDI often attracts for FDI. For example, an auto plant built in Tennessee may attract further investment from auto parts makers wishing to build near the plant. Personally, I am not too concerned with foreign investment in existing businesses such as Disney World. Obviously, it might be nice to keep some of these companies American, but in the end, the investor is going to do what’s best for the local market. If that means keeping a business “American,” that will happen. Landmarks and historical artifacts, for lack of a better term, are a bit different. The Alamo is a “big deal,” and should be owned by Texas.
Wild, J. & Wild, K. (2013). International Business: The Challenges of Globalization. (7th ed.). Upper Saddle River, NJ: Pearson.