Importance of the Methodology- Literature Review
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Added on 2020-02-24
Importance of the Methodology- Literature Review
Added on 2020-02-24
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Running head: LITERATURE REVIEW & METHODOLOGYLiterature review and methodologyName of the student:Name of the university:Author note:
1LITERATURE REVIEW AND METHODOLOGYTable of ContentsChapter 2: LITERATURE REVIEW..................................................................................................................22.1 FDIs in Developing Countries.................................................................................................22.1.1 Positive Benefits..................................................................................................................32.2 Theories of Foreign Direct Investment..................................................................................42.2.1 Critical Evaluation of Dunning's Eclectic Paradigm.............................................................52.3 Determinants of FDI..............................................................................................................................62.3.1 Size of the Market...............................................................................................................62.3.2 Openness.............................................................................................................................62.3.3 Labour Expenses and Production........................................................................................72.3.4 Infrastructure......................................................................................................................72.3.5 Institutes.............................................................................................................................72.4 Modes of entry of Foreign firms into developing countries..................................................................82.4.1 Greenfield (a wholly-owned subsidiary).............................................................................82.4.2 Acquisitions and partial acquisition(PA).............................................................................92.4.3 Joint venture (JV), Strategic Alliance, licensing and franchising.........................................92.4.5 Exporting...........................................................................................................................102.5 Promotional strategies to attract FDI..................................................................................................112.5.1 Direct policy advice to governments................................................................................122.5.2 Policy support for governments.......................................................................................122.5.3 Assistance to investors......................................................................................................132.5.4 Financing for investors......................................................................................................132.6 Remittances and Business Links...........................................................................................14Chapter 3. Yemen’s Case Study.................................................................................................................143.1 Yemens’s Economy..............................................................................................................143.2 FDI in Yemen and FDI Inflow................................................................................................153.3 Political Environment...........................................................................................................163.3.1 Fragile States Index...........................................................................................................16
2LITERATURE REVIEW AND METHODOLOGY3.3.2 State Legitimacy (Political indicators)...............................................................................163.3.3 Public Services...................................................................................................................173.3.4 Human Rights and Rule of Law.........................................................................................173.3.5 Security Apparatus............................................................................................................183.3.6 Factionalised Elites............................................................................................................183.3.7 External Intervention........................................................................................................194.0 Research methodology........................................................................................................................194.1 Research design and Research Approach............................................................................204.1.1 Justification of the Research design..............................................................................214.1.2 Justification of Research approach................................................................................224.2 Research Philosophy............................................................................................................224.2.1 Justification of the chosen research philosophy............................................................234.3 Research Strategy................................................................................................................234.4 Research techniques and ethics..........................................................................................244.5 Data Collection Method.......................................................................................................254.6 Study Population, Sample population and Sample techniques...........................................264.7 Data Analysis........................................................................................................................274.8 Limitations of Research........................................................................................................274.9 Summary..............................................................................................................................29References:................................................................................................................................30
3LITERATURE REVIEW AND METHODOLOGYChapter 2: LITERATURE REVIEWThis literature review is done to evaluate the theories, which focus on the topic that is‘THE ROLE AND IMPACT OF POLITICAL INSTABILITY IN ATTRACTING FDI TODEVELOPING COUNTRIES’. This literature review will analyze, discuss, explore and statethe importance of the given topic.2.1 FDIs in Developing CountriesForeign direct investment or FDI is the investment that an individual or a businessorganization makes by having interest in other country’s business aspects. This investment ismade in the form of initiating business operation or advantages like ownership in the businessorganization of the particular country. It is also the injecting and utilizing of foreign funds in abusiness organization, which operates in another country (Decreuse and Maarek 2015). In thedeveloped countries, increase in FDI leads to the increase in the economic growth rates.However, it is also seen that the development experienced by the financial markets and by theeducation system of a developed country has high affect on FDI’s impact on their economicgrowth. As FDI is a capital transaction it is not kept in recorded in GDP however, the countrythat takes the initiative of the investment records it in the GDP. FDI is a form of cash flow butwhen the investment done is anyhow recalled, there is an advantage of getting back the money.Business investment is the firsts step towards the finalizing the economic growth of a country.The investment curve relies on the expectations of change in capital stock, level of the economy,capital, utilizing of the capital, cost of the goods and the technological change. In developedcountries the business organizations rely on FDI as it supplements their savings by inflowing ofthe capital and promotion of the economic development of a country. FDI is capable of providing
4LITERATURE REVIEW AND METHODOLOGYhigh stimulus to enhance the economic growth of the country and it is more than capital as it isseen to be offering chance to avail the upgraded technologies.2.1.1 Positive BenefitsThe benefits of FDI has many aspects like the reduction of gap and leading to domesticsavings, determining the payment balance, improving the production technology, transferring oftechnology, economic growth and the transportability of the labor resources. A huge number ofdeveloping countries have adapted changes in their FDI regime so that they can follow therequired policy for increasing the investment. FDI has positive benefits in the technologyspillovers, support in capital formation, enhancing the business environment, trade integration ofthe country and improving the development strategy of the organization (Decreuse and Maarek2015). FDI does not only have impact on the economic growth but it improves the social andenvironmental by the help of a clearer technological aspect to incorporate the policies. Though itis difficult to evaluate the economic impact of FDI still it is marked as the key tool to alleviatepoverty in the economy of the countries. the positive benefits of FDI is through the positivedetermination of the economy, which is done by the supplying of the required capital, managingthe technology and the sources, this transfer of resource stimulates the economic growth of thecountry. FDI also determines economic growth in a country by adding the domestic investments.The integration in the global market contributes to the corporate governance and legalacquisitions (Anyanwu, Yaméogo and Ali 2016). However, technology plays a vital role in theprogress of the process of economic growth of a country. Technology helps in incorporatingproduction process. However, the technologies, which are transferred to the other countries andhas contact with FDI is modern.
5LITERATURE REVIEW AND METHODOLOGY2.2 Theories of Foreign Direct InvestmentThe common theories of FDI are:a.Theory of monopolistic advantage: this is described with the help of two aspects; one is thehorizontal foreign investment and the other one is the superior knowledge. This theorydiscusses that the firm, which is investing has monopolistic approach against the other localfirms and they enjoy that with the help of the superior knowledge along with the scale ofeconomy.b.Oligopoly theory of advantage: the vertical FDI is discussed with the help of the oligopolytheory. The big business organization dominates the global market in terms of 10 points ofmistake. The organizations seem to retain their monopolistic aspect by sustaining the barriersof entrance in the market and they deny allowing new competitors in the market and focusingonly on the growth-maximizing factor. Thus, it can be said that the oligopoly theory is thedefensive behavior of the investor of any multifunctional business organization.c.Product life cycle model: this theory explains both the trading and the FDI, there is a timedimension added to the monopolistic theory, and this model will explain the shift of theorganization exporting to the foreign direct investment. This model states that once theproduct is adequate enough to grow, the business organization invest the money abroad andstarts exporting from there to the global market. d.Eclectic theory: dunning proposed this theory and this theory provides a clear approach ofFDI. This theory is dependent on three variable, which are; country specific, companyspecific internalisation and relation between trade and FDI.
6LITERATURE REVIEW AND METHODOLOGY2.2.1 Critical Evaluation of Dunning's Eclectic ParadigmDunning propounded the theory of FDI by highlighting all the organizational issues thatthe business organizations face in case of foreign production. The country- specific variable ofthis paradigm lies on the geographical and political environment, the framework of thegovernment along with the taxation and fiscal policy, the cost of production and transportation,the cultural environment and the advantages from the development and research objectives. Thecompany specific variable depends on the managerial effectiveness, the structure, the processand the technological advantage (Dunning 2014). The internalization depends on the flexibilityand marketing capabilities of the organization. Under a global setting, the FDI is an engine thatdrives an economy to reach the extent level of growth. The physical presence of a producer isvery important to maintain the substantial market while the organization is in a unimportant andineffective area. This is the development of the internalization theory, which provides ownershipadvantages or the competitive advantages and helps the business organization to get involved inthe foreign direct investment. The research experts many times criticize the ideas that underlie inthe eclectic theory and they say that this theory is double counting. This theory identifies that theactivities of a business organization is dependable on many factors like the ownership gains, theadvantage of location and the incentive gains. This particular theory has resemblance to thetheoretical framework of the transaction cost. The ownership gains are divided into three classes,first one signifies the market place benefits, second one highlight the benefits of the businessorganization and the third one highlight the owners of the business organization. The advantagesof location answers the question of where the production is or going to take place. This states thecompatibility of some places more than the other does. The internationalism benefits mark the
7LITERATURE REVIEW AND METHODOLOGYinvesting process of a business organization into a new country. This provides advantage to thereduction of cost and protection of legal rights of a property (Dunning 2015).2.3 Determinants of FDI FDI is seen to have grown as a capital transfer form in the past few years. It is a tool thatis required for the integration of a country and helps in representing the capital investment of thecountry (Das 2013). There are few determinants that resembles the incorporation of FDI in theglobal market. It is important to have the knowledge of the determinants of FDI. Thedeterminants are discussed below:2.3.1 Size of the MarketThe size of the market is one of the most important determinant of FDI, which isevaluated by GDP. The size of the market is the potential that provides its resemblance to thehorizontal GDP. The size of the market is pertinent on the countries that have high purchasingmarket and helps the stakeholders to get high return for the investment that they did. Themarketplaces, which are big in size, get the economy advantage. Increase in the market placeguides the business organization to the FDI (Abdouli and Hammami 2017).2.3.2 OpennessThis is determined by the ratio of the import and export in GDP and this is utilized by thebusiness organization to determine the FDI. To be more precise, the extent of openness that acountry pursues plays a very vital role for describing the fact about how open, the FDI is andwhether it is a good option to invest. The investors who face thee trading limitations entail theindirect trading patterns on a global basis. These have negative impacts on FDI leading a badimpression (Mina 2017).
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