Book contents
- Frontmatter
- Dedication
- Contents
- List of Abbreviations
- Acknowledgements
- Preface
- 1 Introduction: Confronting a Multidimensional Crisis of Capitalism
- Part I Capitalism and Society
- Part II Domestic Institutions of Capitalism on the Demand Side
- Part III Domestic Institutions of Capitalism on the Supply Side
- Part IV The International Institutions of Capitalism
- Part V Anthropocene Capitalism
- Part VI Geo-economic Shifts in Global Capitalism
- Part VII Ideologies in Contemporary Capitalism
- References
- Index
18 - Foreign Direct Investment: Promotion or Restriction?
Published online by Cambridge University Press: 13 October 2022
- Frontmatter
- Dedication
- Contents
- List of Abbreviations
- Acknowledgements
- Preface
- 1 Introduction: Confronting a Multidimensional Crisis of Capitalism
- Part I Capitalism and Society
- Part II Domestic Institutions of Capitalism on the Demand Side
- Part III Domestic Institutions of Capitalism on the Supply Side
- Part IV The International Institutions of Capitalism
- Part V Anthropocene Capitalism
- Part VI Geo-economic Shifts in Global Capitalism
- Part VII Ideologies in Contemporary Capitalism
- References
- Index
Summary
Similar to other large recessions, the coronavirus pandemic has led to low valuations of many companies in distress. Foreign investors may utilize this situation for acquisitions. As we will see, this is not a hypothetical consideration during the coronavirus crisis. Particularly, Chinese companies were quite active with regard to foreign acquisitions. This leads to the question whether the government of the country with the target company appreciates this initiative (as a much-needed rescue operation) or rather harbours concerns regarding the latter (as sell-out of a national treasure). More generally, will post-coronavirus policies for the regulation of inward FDI rather promote or restrict the latter?
FDI policies and International Political Economy
FDIs refer to the practice that companies invest outside their home country. If they set up a completely new facility, this is called ‘greenfield investment’; if they buy an existing facility, this is called ‘brownfield investment’ (usually summarized under ‘mergers and acquisitions’). A second major distinction is between FDI proper and ‘portfolio investments’ – in the latter case, the focus is not on the control of facilities in other economies, but on financial investments. Of course, portfolio investments can morph into proper FDI, if the investor uses ‘creeping acquisitions’ in order to increase its shares of the target company until it acquires control of the latter (Das, 2021: 2). Although FDI (and trade) policies are closely related to the issue of global production networks (see Chapter 17) – they can either facilitate or restrict the latter – these policies warrant a treatment of their own. Put simply, governments decide about FDI and trade policies; companies decide – on this basis – whether they produce (or source inputs) in only one country or spread the production process across several national economies.
Although the debate on the advantages and disadvantages of FDI is not as extensive as the debate between free-traders and protectionists (see Chapter 20), it still has become quite comprehensive, usually with the implicit perspective of a government confronted with the option of inward FDI. Among the most important potential advantages of inward FDI range from the access to additional resources (both financial and technological), the mobilization of tax revenues and employment as well as the transfer of management techniques.
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- Post-Corona CapitalismThe Alternatives Ahead, pp. 115 - 119Publisher: Bristol University PressPrint publication year: 2022