International business enviroment Essay Example | Topics and Well Written Essays - 2750 words

International business enviroment - Essay Example According to the literature on international business, FDI level is dependent on the effects of location of the business environment within a country. Due to uneven distribution of resources in a certain country, the firms will have different advantages in different countries (Hufbauer 2013, p. 1). Studies carried out on determinants of inflow FDI reflects a positive correlation between the economic performance and FDI. Location factors explain the differences in foreign penetration between countries. According to Pentecost and Miner (1996), competitive advantage within the host economies, levels of protection and the size of the reporting market affects the distribution of FDI positively. Studies also show that FDI is significantly affected by the policy measures directed at FDI (Lee 2001, p. 100). The current paper uses a range of relevant theories and data as illustrated in Tables 1 and 2 to critically evaluate variation over time between and within countries in their inflow and outflow of FDI activity. In this case, FDI flows as a percentage of the GDP. These indicators are a representation of the provision of the external financing resources in terms of direct investments within a reporting economy derived from foreign investors and external economies as derived by the domestic investors. The negative FDI values of net inflows within a certain country is a reflection of the disinvestment value from foreign investors being higher than capital value of investments within the reporting country. The negative value for the net outflows indicate that value derived from the direct investments from domestic investors to the external economies is less than the repatriated value of the direct investments from the external economies (Rutten and Boekema 2007, p. 39). Most countries use FDI for evaluation of their economic development processes. The contribution of FDI to national output and