Multinational Corporations and Foreign Capital
Multinational Corporations and Foreign Capital
Multinational Corporations and Foreign Capital
a) Portfolio Investment
It comprises the following:
i) Equity holdings by non-residents in the recipient
country’s joint stock companies,
ii) Creditor capital from private sources abroad invested in
recipient country’s joint stock companies,
iii) Creditor capital from official sources in recipient
country’s joint stock companies.
b) Foreign Direct Investment
There are three main categories of FDI:
i) Equity Capital:
It is the value of the Multinational Corporations
(MNCs) investment in shares of an enterprise in a
foreign country.
i) Market-seeking:
These are attracted by the size of the local
market which depends on the income of the
country and its growth rate.
ii) Efficiency-seeking:
In developing countries where capital is relatively scarce the
marginal efficiency of capital tends to be higher than in the
developed world where it is abundant.
Meaning
An MNC is one which undertakes foreign direct
investment, i.e., it owns or controls income generation
assets in more than one country, and in so doing produces
goods or services outside its country of origin, i.e., engages
in international production.