An analysis of motives

OLI framework is the one that is most widely used by economists. According to OLI, there have to be advantages that can offset costs of making direct investment abroad. Kindleberger argued that for companies to gain advantage by investing abroad market has to be imperfect.

An analysis of motives

This study is mainly qualitative, using secondary data from existing literature. It suggests that German FDI is guided by internalisation advantages, location-specific advantages, and ownership advantages in its motives and prospects in the Chinese market.

The internalisation advantages for German FDI in China include incentives derived from conducting such FDI in the country over other locations or through exporting.

Location-specific advantages are identified as cheap, trained labour, export-oriented nature of existing FDI, quality of local infrastructure, access to natural resources, and cooperation agreements with local suppliers and the Chinese government. Ownership advantages, on the other hand, are identified as technology-based infrastructure and management know-how.

Introduction This report deals with the analysis of motives and prospects within the OLI framework, focusing on a case study of German foreign direct investment FDI in China.

To begin with, it is important to define and describe what the OLI Framework is. It has been a guaranteed viable means to think about MNEs, which likewise paved An analysis of motives way for a range of applied works in economics and international business.

Albeit it does not constitute a formal theory in itself, the OLI framework is nevertheless helpful in classifying many recent empirical and analytical studies concerning FDI Reinert et al. Foreign direct investment FDI has been an important characteristic of globalisation. It is different from portfolio investment since it involves a package of assets and intermediate products and is generally carried out by MNEs Blanco and Razzaque, InGerman companies were placed as the top European investors in China and were ranked as the seventh largest investors in the country.

Some of the pioneer German companies in China are Bayer, Siemens, and Volkswagen, which have been doing business with China for more than a hundred years Reinert et al.

China is also characterised by low-cost assembly line, which serves as a major driver for investing in the country. The issues besetting German FDI in China are the unrelenting legal uncertainties in the country, as shown by the lack of intellectual property rights protection; limited market transparency; the rapidly changing regulatory framework conditions and obstacles; inadequate potential supplier networks; and difficulty in searching for relevant market information due to the problem involving the identification of individual market segments Reinert et al.

Potential German investments also face high input prices in China, such as high prices for raw materials and electricity, thereby making it all the more difficult to attain profit margins.

There is also a rising competition in China in the midst of the growing attractiveness of its market. Literature Review This part of the research report presents an array of published works relating to the topic of investigation to give light to the important concepts and to serve as evidence to the claim that may be posited.

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It also involves a description of methodology and data used. It is predominantly inductive and is carried out in natural settings, discounting the use of quantities and measurements, which are confined within the domain of quantitative research Klenke, Secondary data are solely used for this report.

These are data that have been collected by a person e. These data are therefore non-original. In this research report, they are mainly taken from books, academic journals, and relevant online resources relative to the topic being investigated. The search engines used to locate the needed materials are Google, Scholar Google, and Books Google, from which a number of sources have been uncovered.

The journal articles utilised from these search engines are published by Wiley and Elsevier. In the case of Hong Kong and Taiwan, unique links with China the Chinese connections are important determinants. The study uses a qualitative method and a case study design in dealing with the subject matter.

Its applicability to the topic under investigation is seen in its direct focus on FDI in China and how China has flourished as a location for countries to engage in FDI.

The limitation posed by the study is its emphasis in Hong Kong and Taiwan and does not include German FDI, which does not however mean that the study is already totally irrelevant. In the work of Chen and RegerGerman FDI in China has been described as one that has grown larger in size and of higher quality alongside related technological activitieswith long-term motives and broad market orientation.

German FDI also seeks new markets and expands market shares within China. The research approaches used by the authors include a mail survey and a database analysis.

The work is applicable to the present study because of its emphasis on the nature of German FDI in China. In a separate study by Pikosthe author presents an investigation of the consequences of FDI for German companies in China.

The author highlights the differences amongst the following: When size and sector activity are controlled, attributes to FDI in China include turnover, employment, net income, profit margins, and total assets, to name some. Albeit performance is boosted through FDI elsewhere, this is however on smaller scale.

The methods used by Pikos are descriptive and econometric analysis in order to address the research topic. The applicability of the work to this research is its description of German FDI in China, thereby aiding the research to give light to the topic.

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