Summary and Conclusions

Abstract

This book has taken us on a grand tour of the economic, financial, accounting and management aspects of FDI. We have explored the characteristics, determinants and effects of FDI. We have also gone through the procedures used to determine the financial feasibility of FDI projects and investigated the effects on this feasibility of country risk, taxation and the cost of capital. Then we dealt with the critical issue of transfer pricing, and finally we examined the control and performance evaluation functions in MNCs. It is rather difficult to write a short but a comprehensive summary of what has been discussed, but it is possible to state the following points as some sort of a recapitulation:

• 1. FDI is the process whereby residents of one country acquire ownership of assets for the purpose of controlling the activities of a firm in another country. Interest in FDI results from (i) its rapid growth; (ii) the concern it raises over the causes and consequences of foreign ownership; and (iii) the fact that FDI has become an important source of funds for developing countries.

• 2. FDI can be horizontal, vertical or conglomerate. It can also be classified into import-substituting, export-increasing and government-initiated. Another classification is that of expansionary versus defensive FDI.