Home countries can adopt policies designed to both encourage and restrict FDI. H

Question

Home countries can adopt policies designed to both encourage and restrict FDI. Host countries try to attract FDI by offering incentives and try to restrict FDI by dictating ownership restraints and requiring that foreign multinational enterprises (MNE) meet specific performance requirements Roll over each item on the left to read its description. Determine whether the scenario represents a benefit or cost to the home or host country, and then drag it to the appropriate place on the chart. Outflow of earnings from a foreign subsidiary HOST-COUNTRY BENEFIT HOST-COUNTRY COST Loss of jobs Host country limits profit expatriation Transfer of new technology Loss of local entrepreneurship HOME-COUNTRY BENEFIT HOME-COUNTRY COST Inflows of foreign earnings Increase in direct and indirect employment Skills that can be leveraged internationally. Substitute for imports Loss of economic independence

Explanation / Answer

Host Country Benefit Host Country Cost Inflow of foreign Earnings Loss of economic independence Skills that can leveraged internationally Import Substitution Increase in direct and indirect employment Transfer of new technology Home Country Benefit Home Country Cost Skills that can be leveraged internationally Loss of Jobs Host Country limits Profit expatriation Loss of local entrepreneurship

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