Sample Essay

Empirical studies of FDI location, usually using one of two general research design. First, the use of aggregate data on flows of foreign direct investment in different countries, the researchers examined the relationship between aggregate FDI flows, and many of the characteristics of the locations mentioned above. The problem with this type of research project is the fact that FDI location chosen by individual firms, (Krugman 1994) and aggregate data do not give us much to understand the mechanisms underlying the choice of micro firms. Second type of research design uses micro data on multinational firms to examine solutions to enter specific markets.

Entry is usually seen as discrete data points. For example, MNEs has offices in Canada and theUnited Kingdomin 1989, and then carries out its activities inCanadaand theUnited KingdomandFrancein 1990, entered theFrance. Although data entry gives us a much greater understanding for decision making at the company level, there are two problems with using this type of research in studies of FDI location. First, only a few exceptions, the publicly available data on MNCs, which contain accurate information about the records often, contain information about the size of the entry or the purpose of entry (eg, manufacturing facilities, R & D Lab, distribution operations, etc.). (Krugman 1993) Secondly, and perhaps more importantly, most point solutions MNCs are additional. MNCs may choose, for example, to reduce the scale of its operations inCanada, and twice the size of their existing facilities inIndia. If the researcher only observes the countries in which operates MNCs, there is no room change will be taken into account. However, in this example, there is a fundamental shift in the locations where the MNE operates. In the daily performance of MNCs, the decision to enter a new market made a fairly rare.

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