Multinational and Horizontal Foreign Direct Investment

Seminar paper from the year 2005 in the subject Economics - International Economic Relations, grade: 1,3, University of Tubingen (Internationale Wirtschaftsbeziehungen), course: Hauptseminar Theory and Empirics of International Trade, language: English, abstract: With the ongoing globalization, it is more and more important to take a look at firms that are active on international markets. To understand, which circumstances influence the decisions of multinational enterprises went into the focus of analysis of the new trade theory. This paper gives attention to Multinationals and horizontal foreign direct investments. The Analysis starts with the requirements of firms to implement internationalization strategies, worked out in the OLI framework. First, the relevance of the intra-firm-trade that occurs with or by foreign direct investments, as a part of international trade, will be highlighted. Second, the general conditions, under which multinationals act on international markets, will be pointed out. Third, the author discusses the way how decisions of firms and governments interact and influence each other. Because the focus of this paper is on horizontal multinationals, it concentrates on those parts, which determine the decision of firms to engage in horizontal foreign direct investments and the closely related choice of location.