Research Proposal on Advantages and Challenges of FDI in the US

This research proposal examines the advantages and challenges of Foreign Direct Investment (FDI) in the United States. It begins with an introduction to FDI, differentiating it from foreign portfolio investment and highlighting its significance for both corporations and governments. The proposal outlines the aim to identify the benefits and drawbacks of FDI in the US, exploring the concept of FDI, its advantages, and its challenges. The research questions address the definition of FDI, its benefits, and its challenges within the US context. The literature review provides a theoretical understanding of FDI, citing relevant research on its economic impact, job creation, and the role of human resources. The proposal also discusses the research methodology, including research design, method, sample selection, data collection, and analysis, along with research limitations and a timetable. The paper highlights the economic growth, job creation, and innovation that FDI brings, while also addressing challenges such as the recent decline in FDI in the US. The proposal concludes by summarizing the benefits and challenges of FDI in the US market.

Running head: RESEARCH PROPOSAL
Advantages and Challenges to FDI in US
4-1-2020

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Table of Contents
Introduction................................................................................................................................2
Title.........................................................................................................................................2
Research Background.............................................................................................................2
Aim and Objective..................................................................................................................3
Research question...................................................................................................................3
Research Significance............................................................................................................3
Literature Review.......................................................................................................................4
Introduction............................................................................................................................4
Foreign Direct Investment......................................................................................................4
Advantages of Foreign Direct Investment in the US..............................................................5
Enhance local economy......................................................................................................5
Enhanced human resources.................................................................................................6
New opportunities for the workers.....................................................................................6
Challenges to Foreign Direct Investment in the United States...............................................6
Summary.................................................................................................................................7
Research Methodology...............................................................................................................7
Introduction............................................................................................................................7
Research design......................................................................................................................8
Research method....................................................................................................................8
Sample selection.....................................................................................................................8
Data collection........................................................................................................................9
Data analysis...........................................................................................................................9
Research limitations.............................................................................................................10
Summary...............................................................................................................................10
Timetable plan..........................................................................................................................10
References................................................................................................................................12

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Introduction
Title
“Advantages and Challenges of Foreign Direct Investment in the United States”
Research Background
Foreign direct investment is a kind of investment in the controlling ownership form in a
business a specific nation by an organization or entity with a home base market in another
country. It is therefore different from the foreign portfolio investment related to direct
control. FDI has become a keystone for corporations as well as for government. By gaining a
controlling interest in the assets of the foreign market or business, an organization can very
fast get new technologies and products. Along with this, they can also set their current
products to the new market. With the encouragement of increased FDI, the government can
generate more job opportunities and enhance economic growth. For the investors of the
international market, foreign direct investment performs a highly essential role. The emerging
market’s growth has yet to be grown for foreign direct investment. Businesses that are
investing in the abroad market can gain a higher rate of growth and diversified income that
generates more opportunities for investors.
It is very tough to exaggerate the macroeconomic significance of FDI with around $1 trillion
worth of the capital changing hands in the year 2010. Where these funds generally enhance
the status of the host country, but there are some of the challenges that can arise. Therefore, it
has been said that the sustainable levels of income through the FDI is mostly observed to be
healthy for the economy for the investors of the international market. Some of the aids of FDI
are economic growth, generating job opportunities, and transferring technology. But along
with this, there are some drawbacks such as strategic industries, disruption of the local
business or industry, and long-term capital movement.

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The aim of this study is to similarly focus on the advantages and the challenges that foreign
direct investment provided to the United States. In order to do so, this paper is first clarifying
the notion of FDI. Afterward, it is highlighting the advantages and challenges for FDI in the
United States market. This will help the reader in understanding the notion and different
aspects of FDI by taking into consideration a real example that is of the United States market.
Aim and Objective
The aim of this report is to identify the advantages as well as challenges of foreign direct
investment in the United States. In order to meet this aim, the objectives are:
 To explore the notion of Foreign Direct Investment.
 Recognize the advantages of Foreign Direct Investment in the US.
 Highlighting the challenges of Foreign Direct Investment in the US.
Research question
 What is the notion of Foreign Direct Investment?
 What are the advantages of Foreign Direct Investment in the US?
 What are the challenges of Foreign Direct Investment in the US?
Research Significance
The significance of this research is that it will support the reader as well as the investigator in
understanding the concept of FDI by taking into consideration the United States market. It is
generally said that an increased amount of foreign direct investment provides a number of
benefits or advantages to a market and its business, however, it is not just the only thing.
Foreign direct investment also has some challenges for the market because it results in
negatively impacting the local businesses of the host country. Hence, it becomes very
important to not to generally make the perception about any concept and understand the
diverse aspects. This will not just increase the knowledge and understanding of a concept but
also helps in judging and understanding the related aspects of the concept. In addition to this,

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the presentation of this paper will help the reader in presenting his or her paper in the future
related to this topic and will provide support in presenting a reliable conclusion.
Literature Review
Introduction
A literature review is all about the review of the scholarly papers or a kind of review article.
It is said to be the review of the scholarly paper that provides current knowledge comprising
substantive findings and theoretical contributions to a definite subject (Ridley, 2012). This
part of the research proposal is providing a theoretical understanding of the research topic
that is the advantages and challenges of FDI in the United States.
Foreign Direct Investment
According to Jensen, Biglaiser and Li (2012), foreign direct investment is one form of
investment that is done by a company in an interesting business located in another country.
Usually, Foreign Direct Investment is done at the time when an investor plans its activities of
the corporation in the abroad market or acquires the assets of foreign business. But the FDI is
dissimilar from the portfolio investments because in that the investor just buys the equity of a
business based in the foreign market.
Razin and Sadka (2012), stated that foreign direct investments are generally done in an open
economy that provides experienced and skilled employees and growth opportunities for the
investor, in comparison to those economies that are strictly regulated. Generally, foreign
direct investment is comprised of more than a single capital investment. It can include
technology and management provision. The main foreign direct investment feature is that it
helps in establishing an effective control or considerable influence on the decision making of
the business of a foreign country. As per the Bureau of Economic Analysis (BEA) that
focuses on tracking the foreign direct investments of the investors into the business of the
United States, revealed that total FDI that was made in the year 2018 in the US were of

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around $253.6 billion. The chemical industry is considered to be on the top in the list with
around $109 billion in foreign direct investment in 2018 (Kuepper, 2019).
As per the opinion of Moon (2015), foreign direct investment can be done in different ways
comprising acquiring the controlling interest in the foreign business or by doing merger with
a foreign company or starting a subsidiary or associate company in the foreign market.
Advantages of Foreign Direct Investment in the US
The foreign direct investment enables the developed world for starting enhancing the
opportunities in the emerging market. The developed world can consider the improvements in
the opportunity and wealth, whereas the developing world can get benefit from the
augmented profits, improved relationships, and high market influence level (Sudha, 2013).
Enhance local economy
The businesses or individuals that take part in foreign direct investment can stimulate
economic growth at the domestic level for their headquarters. The profits are also reinvested
in the business operations for gaining the opportunities that can generate new jobs. The same
is also done for the home market of the foreign investor. Foreign direct investment performs
an essential role in confirming the economic growth as well as the prosperity of the United
States, generating compensated jobs, driving exports, and spurring innovation. As per the
analysis conducted, it has been identified that the total FDI stock that the US has in 2018 is
US$4.3 trillion. Besides this, the total foreign direct investment flows in the nation in the
same year is US$253.6 billion (Select USA, 2020). Considering the innovation in the
country, it has been identified that spending on research and development in the year 2017 by
the United States affiliates of most of the foreign-owned companies is US$62.6 billion.
Besides this, 53% of the United States utility patents were registered from the international or
abroad sources in the year 2016 (Select USA, 2020).

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In addition to this, there are around 7.4 million of the workers in the US got the job by the US
affiliates of the firms owned by foreign groups. Out of these, 2.5 million are working in
manufacturing jobs (Select USA, 2020).
Enhanced human resources
Companies are successful due to the expertise of their human resource. In the world of
developing and under-developed countries, human resource is limited to agricultural work,
basic labor work, and different entry-level skills. FDI helps in creating educational
opportunities such that people can enhance their skills. With the help of improved skills, they
can earn better wages (Schutter, Swinnen and Wouters, 2013). There is an increase in
productivity. Here, the benefit is not just gained by the company but also by individual and
that dribbles down to every community.
New opportunities for the workers
Workers of the United States market are hired by the foreign businesses, which allow them to
travel to the foreign market and gain experience of new ideas and cultures. This helps them in
making more productive at home. Foreign workers get a better chance to access the improved
practices that support them in creating new opportunities (Moran and Oldenski, 2013). This
procedure supports both the parties to grow at a faster rate in comparison if they would have
been in their country. This can be understood by the data presented above that around 7.4
million of the workers in the US got the job by the US affiliates of the firms owned by the
foreign groups (Select USA, 2020).
Challenges to Foreign Direct Investment in the United States
The above advantages reveal that the US is the most flourishing and attractive economy for
FDI. Though, the recent data reveals that international businesses are pushing a pause button
in their investment in the US market. As per the data revealed by the U.S. Bureau of
Economic Analysis, in the United States FDI has highly decreased in the 2018 second

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quarter. Preliminary the flow of FDI in the year 2018 was in a negative direction, leading to
the divestment of the amount of around $8.2 billion (Site Selection, 2018). It is very
important to note that there have been only six examples of the net divestment in the foreign
direct investment in the US since 1982. This is the situation of concern because after noticing
a record-breaking FDI in 2015 and 2016, a decline in the year 2017 in FDI was surprised
since it was a decline of around 40% in comparison to 2016 data. As per the news revealed
by the United Nations Conference on Trade Development, highlights that in the Investment
Trends Monitor report there is a global fell in the FDI by around 41% in the initial half of
2018 in comparison to the same time duration in the year 2017 (Site Selection, 2018).
UNCTAD has highlighted a huge decline in the inflow of FDI in the US as the major cause of
the overall decline. This decline in foreign direct investment is not just a simple number but it
is a decrease in the income of the workers of America, their families, and jobs.
Summary
From the above analysis, it can be summarized that FDI in the United States market provides
a number of benefits but it also has challenges. FDI results in economic growth by providing
better job opportunities and increases innovation. However, the present scenario of the United
States reveals that there is a decline in the FDI in the country.
Research Methodology
Introduction
The research methodology is said to be the theoretical analysis of the methods that are used
for applying in the arena. It is encompassed of the theoretical analysis of the methods that are
related to the knowledge branch (Kumar, 2019). In this section of the proposal, different
methods and approaches are being described that are used to gather the data and analyze the
same related to the research topic.

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Research design
It is the group of processes and approaches that are adopted by the investigator for
assembling and assessing different variables of the research problem (Panke, 2018). Different
types of research designs are available that are descriptive research, casual research, and
exploratory research (Salkind, 2010). To present this paper, the adoption of a descriptive
research design will be done as it will help in gathering detailed theoretical information
related to the topic of the research. The use of causal research design will not be done
because there is no need for presenting cause and effect relationships. Besides this,
exploratory research has also not been used because there is no requirement to explore
anything new.
Research method
The research method is also called a research strategy that is adapted to get a direction to
complete the paper. There are different types of research strategies used such as literature
review, interview, questionnaire, experiment, etc. (Farquhar, 2012). To present this paper, the
researcher will make use of a literature review that helps in gathering detailed theoretical
information about the research problem and support in presenting a reliable conclusion.
Sample selection
The sample is said to be a small part of the population that is selected for gathering reliable
information for the research. The sample represents the entire population on which the
research is conducted (Thompson, 2012). Sampling is important in the research as its support
in recognizing the method utilized for selecting the sample for the study. There are two
sampling methods that are probability sampling and non-probability sampling. For presenting
this paper, the researcher will make use of probability sampling for gathering secondary data.
Under probability, sampling equal chance is given to the entire target population for the
research (Naurang and Mangat, 2013). Whereas, in the case of non-probability sampling

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equal chance is not provided to the entire population to get selected in the research, which
can result in the deviation in the results of the paper (Daniel, 2011). Under Probability
sampling, 15 respondents will be selected for gathering primary data for identifying the
solution to the research question. The respondents will be the representation of different
MNC’s operating in the US in order to identify the advantages and challenges in FDI in the
US.
Data collection
Data collection is said to be the most significant portion of the paper as it is comprised of
detailed information for the research topic. There is the availability of two methods of
gathering the data for the research that is the primary method and secondary method (Flick,
2017). The primary method is all about assembling fresh data related to the topic by the
adoption of different methods like an interview, questionnaire, survey, case study,
experiment, etc. (Olsen, 2011). Secondary method is about gathering secondary theoretical
data about the topic of the research that has already been published (Phillips and Stawarski,
2016). To present this paper, the adoption of both the methods will be done in order to have
enough information for the topic of the research. In order to gather primary data, the
investigator will use survey through a questionnaire as the strategy to gather important
information from the respondents. On the other side, to collect secondary data, the researcher
will make use of different sources like a journal, books, articles, websites, government report,
etc.
Data analysis
Data analysis is another significant share of the methodology as here the method of analysis
is selected that is used to analyze the gathered data (Janert, 2010). First, the researcher
gathers the data by the use of different methods and then analyzes it to identify the reliable
and valuation information to present the research findings and conclusion. There are diverse

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methods such as content analysis, statistical analysis, thematic analysis, etc. of data analysis.
In order to present this paper, the investigator will make use of the statistical analysis method
under which the use of a table and graph is used to present the information (Hedges and
Olkin, 2014). In this research first, the researcher will gather the data by using the secondary
and primary method and then will analyze it by using a statistical method to present a reliable
conclusion.
Research limitations
The limitation of this research is that the researcher has limited funds that can be a major
deviation in presenting the detailed information for the research topic. Besides this, the US
market is comprised of a number of foreign companies operating their business; it will be
tough and costly to visit them for gathering primary data.
Summary
The analysis has highlighted that the use of the primary and secondary methods for data
collection support in accumulating enough information for the research that helps in
presenting dependable and valuation conclusions.
Timetable plan
In order to present the timetable of the research, the use of the Gantt chart has been done.
Gantt chart is said to be a kind of bar chart that is used to exemplify the agenda of the paper.
This chart is named after its founder that is Henry Gantt. Below is the Gantt chart for this
paper that highlights the complete schedule of the research.
Time (In
Months)
Research Activities 1 2 3 4 5 6 7 8 9
1
0
1
1
1
2
Identifying Research Topic
Research Aim and Objective
Research Question

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Collecting Secondary Data
Presenting a Literature Review
Gathering Primary data
Presenting Research
Methodology
Data Analysis and Findings