ABSTRACT
This chapter explores the forces and opportunities that support foreign investment by multinational corporations. Every firm that considers investing abroad must weigh the potential advantages against the potential risks. A recent publication by the Economist ranked the countries of the world according to the friendliness of the business environment. Many international firms decide to invest overseas to tap larger foreign markets. In fact, many companies, especially in the high-technology area, hold on to their know-how so closely that they do not license it as a matter of policy. Political risk for multinational corporations includes adverse actions that may be taken by host-country governments against the firms. Access to new technology is often sought by the outright acquisition of new firms possessing such knowledge. The monetary and fiscal policies of a host government may be at variance with an MNC's desires. The industrial and economic development policies of a host country can often pose a risk for an MNC.
