Foreign Direct Investment

Paper Summary:

This paper deals primarily with foreign direct investment (FDI) as it pertains to developing countries. It discusses some of the problems and benefits that may be seen from FDI, with a specific case study examination of the Russian oil sector. The paper then discusses the tie-in between British Petroleum and Tyumen Oil Company (TNK). The paper also discusses sovereign ratings and problems that surround these companies and FDI. The paper concludes with suggestions on how to minimize these problems.

Table of Contents:
chapter 1 - Introduction
Background/Overview Of The Problem
Research Question
Benefits Of The Study
Scope Of The Study
Chapter 2 - Literature Review
Industry/Organizational Background & Perspective
What Is Foreign Direct Investment?
The Two Main Forms Of FDI
Greenfield Investment
Mergers & Acquisitions
Distribution Of FDI In Many Countries
Factors Affecting FDI
The Roles Of Government Policy In FDI
Favorable Policies Toward FDI
Restricting Polices Toward FDI
Various Theories Of FDI
FDI And Multinational Corporations
Case Study - British Petroleum And TNK
Chapter 3 - Research Methodology
Research Design
Data Collection Method
Chapter 4 - Data Analysis And Presentation
Porter's Five Forces Model And The Russian Oil Sector
Chapter 5 -Conclusions And Recommendation

From the Paper:

"However, even though the government problems in many areas are no longer what they were, this does not mean that the corrections will be rapid or automatic. There is a 'status quo' in many countries, and changing that is often very difficult, because people have lived with it for so long. Those that are high up in government or business are generally content, most likely, with what they have, and therefore they do not want changes to be made. For those that work in menial jobs, however, the idea of change and improvement is likely very appealing."
"These changes can be helped along by FDI, but these countries must also find ways to help themselves, because counting on FDI is not necessarily a good choice for these countries. Where the Russian oil sector is concerned, it would appear that the country could count on the FDI dollars that they are getting, but the future may change this as other companies begin to realize that they could invest in other countries more cheaply."

Sample of Sources Used:

• Altman, E. & Kao, D.L. (1991). Corporate Bond Rating Drift: An Examination of Rating Agency Credit Quality Changes Over Time. New York University-Salomon Brothers Working Paper S-91-40.
• Baughman, L, Mirus, R., Morkre, ME, & Spinanger, D. (1997). Of Tyre Cords, Ties and Tents: Window Dressing in the ATC? The World Economy 20 (July): 407-434.
• Bhagwati, JN. (1987). Trade in Services and the Multilateral Trade Negotiations. The World Bank Economic Review 1 (September): 549-569.
• Billet, M. (1996). Targeting Capital Structure: The Relationship Between Risky Debt and the Firm's Likelihood of Being Acquired. Journal of Business.
• Calderon, C., Loayza, N., & Serven, L. (2004). Greenfield foreign direct investment and mergers and acquisitions: feedback and macroeconomic effects. World Bank Policy Research Working Paper 3192. http://www.rpi.edu/~leshcd/classes/MBA-2/Greenfield_and _Mergers.pdf.

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