The effects of Foreign Direct Investment on Domestic Firms

Running head: THE EFFECTS OF FDI ON DOMESTIC FIRMS 1
The effects of Foreign Direct Investment on Domestic Firms
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Institution

THE EFFECTS OF FDI ON DOMESTIC FIRMS 2
Table of Contents
The effects of Foreign Direct Investment on Domestic Firms........................................................3
1. Statement of Problem...........................................................................................................3
2. Research Aim and Objectives...............................................................................................3
3. A Brief Methodology............................................................................................................4
4. Secondary Data Analysis Methods.......................................................................................4
References........................................................................................................................................6

THE EFFECTS OF FDI ON DOMESTIC FIRMS 3
The effects of Foreign Direct Investment on Domestic Firms
1. Statement of Problem
Foreign Direct Investment aims at improving the annual sales of a firm. Some of the
problems of FDI includes adverse competition for both domestic and foreign companies. Foreign
companies bring adverse competition to the domestic firms and this may result to their failure.
However, the foreign firms may face stiff competition from the domestic firms resulting to their
failure. Also, firms may be affected by the high taxes, and political instability, which may reduce
their profit margin (Frieden, & Lake, 2015).
According to Kim, & Mauborgne (2017), business competition has increased over the
years and firms are looking for ‘Blue Oceans’, which are markets with no competition in order to
attract a large market base. Additionally, some of protection of home firms include some country
governments putting strict measures to restrict influx of foreign companies such as quotas in
order to protect their domestic companies form the stiff competition (Boly et al., 2015).
Basically, the main effect of FDI is stiff competition and this business research will enable firms
have an incite of what they expect from FDI hence they will put strategic measures to ensure
their survival in the market.
2. Research Aim and Objectives
The objectives of this study will be to determine the parameters surrounding foreign
investment effects on domestic firms. It will aim in identifying the pros and cons of domestic
firms with regard to FDI. In order to remain competitive in the market, firms invest in foreign
countries not only to increase sales but also grow their businesses thus increasing competition to
the domestic companies, which might not be up to their standards. Therefore, this research