International-Business-Dr-R-Chandran-E-book

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International Business- Dr. R. Chandran
• Export promotion: It seems that FDI could be related with export trade in
goods, and the hosting country can benefit from an FDI-led export
growth.
• Generating employment: It leads to generation of both direct and indirect
employment opportunities in the host country.
• Infrastructure: In order to facilitate and enable the investors perform well,
the host country studies other competitive destinations and enhance the
level of infrastructure to match the requirements of the investors. India’s
silver valley in Bangalore, Hitch city in Hyderabad and Tidel Park in
Chennai have revolutionized the areas through connectivity.
• Social effects: Closed economies have started to liberalize their economy
through market reforms that are favourable to foreign investors through
privatization, property rights and liberal labour policies. Society at large
gets the benefit while employment, infrastructure, literacy and health care
are bound to improve as an impact of FDI inflow.
• Formation of Clusters: Group of similar projects and manufacturing
centres are formed in a specific location by way of providing common
production , R&D, training and pollution control system to group
competing companies. In Italy, Brazil and India, such clusters have made
wonders.
• Spillover: Statistical evidences exist across the world to show that FDIs
have a number of spillovers. Business history is replete with examples
where persons trained in companies started their own ventures and
became successful leaders in their respective fields. Silicon Valley in the
U.S. provides many examples of such spin-offs. Intel is a spin-off of
Fairchild. The main competitor to Intel today is its spin-off. Even in
India, the machine tool industries of Ludhiana and Bangalore are spinoffs
of yesteryears’ popular companies like SKF, Bosch or MICO.
Cost for the Host Country
• The investing companies may not serve the host country’s interests.
• There is an outflow of earnings as they are repatriated to their home
country.
• Import of substantial inputs from the country of the investor.
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