Pros and Cons of International Investment

Research problem

Globalization and international cross-investment are the recent and defining

features of economic life. All aspects of corporate activity, from R&D and product
development to production and marketing, must be oriented to and increasingly take
place in major markets throughout the globe. Globalization is occurring through a
variety of mechanisms, but none is more important than international investment,
which has risen to all-time highs over the past decade (Canto & Laffer 2002).
International investment stands ever more clearly as a key determinant of domestic
productivity and of economic success in the global economy. The inflows bring jobs
as well as new technologies and management practices to the host country. The
outflows enable companies to open markets abroad, generating exports in the form
of intra firm trade. The issue at stake in the debate over international investment
should be the ability of an economy to attract it. The policy toward international
investment has generally been based on adherence to the principle of equal
treatment for all investors, which ensures that all firms are treated equally regardless
of nationality of ownership. This principle means that foreign investors are treated
the same as domestic investors under local laws. Equal treatment strengthens the
economy by ensuring a stable international investment system, attracting foreign
capital and, in theory, helping to protect investments in other countries. The practice
of conferring most-favored nation treatment has also meant that a foreign-owned
company receives treatment no less favorable than that accorded any other foreign-
owned companies (Beltz 2001). This paper is a proposal to analyze how
international investments contribute to solving budget deficits of developing
countries.

Aims and objectives

1.    Analyze the concept of international investments

2.    Understand the onset of budget deficits in developing countries.

3.    Know how developing countries solve budget deficits.

4.    Determine the cause of budget deficits.

5.    Analyze how international investments assist in solving budget deficits of

developing countries.

Literature review

A new view on investment has emerged in the past decade, largely in

response to new trends. The classic view of international investment and of the
multinational corporation is that the principal motive for international investment is
the desire of multinational firms to secure the least costly production of goods for
sale in world markets (Glickman & Woodward 2003). Multinational corporations
strategically arrange their activities according to an international division of labor,
with high-level administration, finance, and technology development, for examples,
occurring in central, core locations and more standard production and labor located
in lower-wage, peripheral locations. International investment reflects a particular type
of firm-specific asset, referred to as an internalization advantage. International
investments result when a firm has advantages such as technology or products that
it can exploit in global markets; overseas investment offers a cost-effective
mechanism for exploiting such advantages, as for example if offshore production
offers greater returns than technology licensing; or overseas factor conditions are
favorable. The conventional theory suggests that international investment is driven
by firms seeking to exploit advantages that come from economies of scale or
superior technology to preserve or increase market share and reduce costs of
production. The new focus on international investment turns attention to the
relationship between the globalization of production, international investment, and
domestic productivity growth. It suggests that international investment is often the
source of technology transfer, new management practices, and knowledge that leads
to productivity improvements, employment growth, and increasing wealth for the host
nation. This role should not be minimized (Graham 2000).

Methodology

Sample collection

To determine the number of respondents that will be asked to participate and

give information regarding the study convenience sampling will be used.
Convenience sampling means to collect or interview individuals who actually
experience the phenomenon. Convenience sampling will focus on individuals that
experienced diabetes mellitus or has someone in the family that experienced such
disease.

Methodology/Data Collection

Surveys will the primary method of data collection.  Internet surveys would be
used. Internet surveys have been both hyped for their capabilities and criticized for
the security issues it brings. Internet surveys require less finances since there would
be no printing of paper and there would be no need to travel just to gather data.
Internet surveys would also require less time for the researchers and the
respondents.

Data Analysis

            In analyzing the collected data, the paper will be divided into the
demographic profiles of the respondents and the ideas of respondents. The data that
will be acquired will be put into graphs and tables.

References

Beltz, CA (ed.) 2001, The foreign investment debate: Opening

markets abroad or closing markets at home?, American Enterprise

Institute, Washington, DC.

Canto, VA & Laffer, AB (eds.) 2002, Monetary policy, Taxation

and international investment strategy, Quorum Books, New York.

Glickman, NJ & Woodward, DP 2003, The new competitors: How

foreign investors are changing the economy, Basic Books, New

York.

Graham, EM 2000, Fighting the wrong enemy: Anti-global

activities and multinational enterprises, Institute for

International Economics, Washington, DC.

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