INTRODUCTION Globalization has contributed significantly to the rise of foreign direct investment across the world as various countries and companies engage foreign markets to satisfy their needs. Foreign direct investment initially focused on the flow of capital via the host nation; however, modernization and technology growth has seen it also involve aspects of technology acquisition and human capital development (Qu and Green, 2018). The
beneficial aspects of foreign direct investment, such as increased foreign capital, employment, revenue, and others, have seen various nations develop policies that attract foreign investors such as investment credits, tax holidays, and others.
However, the success of the foreign direct investment also relies on the various strategies used by the foreign investor while entering the international markets (MOON, 2015). The various strategies that foreign investors can use to enter an international market include buying shares of the local company, acquires or mergers with the local
business, engaging with equity joint venture, and incorporating a wholly-owned subsidiary. In Asian markets, foreign direct investment varies across the economic classes, with the largest taking up the largest share such as China, Singapore, and Japan that make up 50% of the region’s FDI. Middle and low-level economies in the Asian
market take up lesser foreign direct investment, and the challenges they face, such as low technology availability, are contributing to this occurrence (WITKOWSKA, 2018). In the European region, the same aspect can be seen as high-level economies such as Germany, UK, and others make up large parts of the areas foreign direct investment due
to they improve human capital and technology. Middle-level countries such as Poland, Hungary, the Czech Republic, and Slovakia take up average levels of the areas foreign direct investment.
The research found that the two regions, Europe and Asia, had a significant foreign direct investment as they contained various large economies. However, the strategies used to enter such markets varied by region and country. For example, China adopted an aggressive approach and utilised all foreign entry strategies, such as setting up new subsidiaries, buying shares, derivatives, and securities (WITKOWSKA, 2018). On the other hand, European based company’s underutilised derivatives and securities, debt, and real estates in investing in foreign markets but preferred setting up new subsidiaries and buying shares (MOON, 2015). However, there was a considerable research gap as there was minimal research that investigated the foreign direct investment strategies of Asia and the European region and none that compared them, and the research purposed to address this problem.
AIM OF THE RESEARCH To compare the foreign direct investment strategies in Europe and Asia and identify their trends.
RESEARCH OBJECTIVES To identify foreign direct investment strategies used in the European markets
To identify the foreign direct investment strategies used the Asian markets
To compare and contrast the foreign direct investment strategies of both European
and Asian markets
RESEARCH QUESTION What are the foreign direct investment strategies used in the European markets?
What are the foreign direct investment strategies used in the Asian markets?
How does the foreign direct investment strategies used in the European markets
compare to that of the Asian markets?
FOREIGN DIRECT INVESTMENT According to Moon (2015), foreign direct investment occurred due to the growth of globalization, which saw local economies interact with other world markets. However, the authors found that the local economy had to allow the foreign markets to enter its sphere, enabling them to invest and establish their businesses. Besides, the country had to have established effective technology and infrastructure that enhanced factors such as transportation, communication, and others that were vital for the success of their foreign investors. Corcoran and Gillanders (2015) concurred with Moon (2015) description of foreign direct investment and explained that the unequal distribution of resources around the world significantly contributed to the rise of the phenomenon. The scholars found that various resources were spread out in the world, and demand for the same was also varied, and hence, those with the resources allowed companies to enter their market and trade. For example, developing nations had abundant resources but lacked equipment and skills to process them while developed countries had the later but lacked enough of the resources. As such, globalization, enhancements in technology, foreign policy, and unequal distribution of resources meant that the growth of foreign direct investment was inevitable. Corcoran and Gillanders (2015) explained that in foreign direct investment, there is a cross-border investment aspect where a foreign investor enters a local market and establishes a long term engagement within the local economy. However, the authors found that the foreign investor had to gain control of the local business by 10% or more for it to be categorized as a foreign direct investment. The 10% or more ownership of the local market allows the foreign investor to have substantial influence over the daily operations of the business. Oury Bah, Kefan, and Izuchukwu (2015) supported Corcoran and Gillanders (2015) when they noted that there various foreign direct investment
strategies such as buying shares of the local company, acquires or mergers with the local business, engaging with equity joint venture and incorporating a wholly-owned subsidiary.
FOREIGN DIRECT INVESTMENT IN EUROPE According to Napiórkowski (2017), the European region has seen considerable foreign direct investment over the years as its infrastructure, human capital, technology, and favourable business environment attract foreign investors. The authors detailed that even the middle-level countries in the European region have realized an improved foreign direct investment. Napiórkowski (2017) showcased that among the V4 members, European alliance between Poland, Hungary, the Czech Republic, and Slovakia, Poland received the highest level of foreign direct investment between 2011 and 2015. For instance, in 2015, Poland gained USD 1.70 per USD 100 in foreign direct investment that entered the European region. In the same year, Napiórkowski (2017) realised that the Czech Republic had a share of 0.28$, Hungary 0.29$, and Slovakia 0.18$. The scholars found that Poland, Hungary, the Czech Republic, and Slovakia heavily invested in human capital, technology, and wage improvement to attract significant foreign direct investment. Seaman, Huotari, and Otero-Iglesias (2017) supported Napiórkowski (2017) findings that the European region was receiving significant foreign direct investment. The scholars found that China is one of the largest economies in the world had invested in nearly all European countries. Both Seaman, Huotari, and Otero-Iglesias (2017) and Napiórkowski (2017) realised that the improved human capital, technology, structures, and policies were the main reason for the increased foreign direct investment from Asia. Seaman, Huotari, and Otero-Iglesias (2017) found that in the European region, all available foreign direct investment strategies have been adopted by foreign investors. The authors found that the strategies include setting up new subsidiaries, buying shares, derivatives, and securities. Seaman, Huotari, and Otero-Iglesias (2017) found that China uses all the above strategies in its foreign direct investment in the European region. Besides, China uses a specific strategy where it holds European debt securities as part of its reserves that has eased its entry into the European region economies. Seaman, Huotari, and Otero-Iglesias (2017) also found that China has been buying, leasing, and offering service contracts in the European, real estate; however, there is significant contention on whether this can be defined as a foreign direct investment strategy.
Jirasavetakul and Rahman (2018) supported Seaman, Huotari, and Otero-Iglesias (2017) findings when they noted that the European region had developed various approaches to attract foreign direct investment. The authors found that in the European region has provided financial incentives, tax holidays, and investment credits to foreign investors to attract them to the area. Both Jirasavetakul and Rahman (2018) and Seaman, Huotari, and Otero-Iglesias (2017) also found that political stability was crucial importance for the success of the foreign direct investment strategies adopted in the European region. Jirasavetakul and Rahman (2018) affirmed to this when they analysed a survey and found that 50% of the foreign investor respondents stated that political stability was key to their successful strategy while entering the European region.
FOREIGN DIRECT INVESTMENT IN ASIA According to Diaconu (2014), foreign direct investment in Asia has taken various dimensions, trends, and strategies over the past decade. The authors found that after the Asian financial crisis, the region recorded low foreign direct investment, especially for Malaysia. Diaconu (2014) detailed that Malaysia was unable to compete with its neighbours such as China that offered low production costs, and this led to its middleincome trap, and this led to its reduced foreign direct investment. Witkowska (2018) supported Diaconu (2014) by arguing that the attractive foreign direct investment in Asia was Singapore, China, and Japan, and they accounted for 50% of Europe’s foreign direct investment. Moreover, China’s importance as a global foreign direct investment has grown substantially with South Korea, India, and Indonesia following it closely, especially in regards to European foreign direct investment. Witkowska (2018) also found that the Asian market has steadily grown concerning the attraction of foreign direct investment from Europe and other international markets. For example, between 2008 and 2010, Asia was the third largest receiver of foreign direct investment from Europe. Witkowska (2018) also explained that in 2010, the Asian market took 20.4% of Europe’s foreign direct investment share with Japan taking 1.5% of that percentage as the highest. Napiórkowski (2017) agreed with Witkowska (2018) and explained that the foreign direct investment in Asia contributed to the region’s economic growth as it provided external capital sources for their local needs. Also, the involvement of foreign direct investment in Asia led to technological growth as they received skills and
equipment’s from the companies entering their markets. However, the review noticed vast research where there was little to no analysis of the various strategies used in foreign direct investment in regards to the Asian market.
RESEARCH PHILOSOPHY Descriptive correlational research designs are non-experimental and allow the investigator to analyze variables and assess the statistical connection while eliminating external, extraneous variables that would reduce its validity (Curtis, Comiskey, and Dempsey, 2016). The approach utilizes the correlation coefficient that bases the relationship as either positive or negative, +1, or -1, respectively.
RESEARCH DESIGN The research will adopt a descriptive correlational research design as there is a need to compare the Asian and European markets based on their foreign direct investment strategies. The approach allows the research to analyse and describe the existing data as it is without attempting to justify any hypothesis as the various events related to FDI have already occurred. SOURCES OF DATA The foreign direct investment strategies will be gathered from government websites and reports, regional body’s reports such as the EU, Asia-Pacific Economic Cooperation, and others. The Gross Domestic Product will be gathered from the samenamed sources as foreign direct investment strategies. SAMPLING AND SEARCH KEYWORDS The research will utilise Google Search Engine to find the sources related to foreign direct investment as it is fast efficient and will allow the study to factor in its inclusion and exclusion criteria. The keywords used in the search will include Asian FDI strategies, European FDI strategies, foreign direct investment, foreign investors and Gross Domestic Product. Inclusion and Exclusion Criteria The study will only include data related to Asian and European foreign direct investment. Data that is not part of a recognized body such as blogs, personal news.
websites, and others will be eliminated from the data collection process. The collected data should also be published in English as any language conversion might distort the quality of the information being provided. DATA COLLECTION The study will utilise secondary data to gather information related to the foreign direct investment strategies of the Asian and European markets. The data will be collected from annual regional reports such as the Asia-Pacific Economic Cooperation, the European Union, and others.
DATA ANALYSIS Computed based software such as SPSS, Microsoft Excel, and Apache Spark will be used to categorize and process the data to showcase its correlations and display them on figures. RESEARCH LIMITATIONS Due to the vast size of the European and Asian markets, the research may face time constraints as the data collection and processing would need more period to complete, yet the investigation needs to be completed within the stipulated period.
ETHICAL CONSIDERATIONS The research will observe all ethical rules as per the institution’s requirements. Also, websites and organization reports where the data will be collected will be informed of the study’s purpose. Also, their data will be given proper recognition to avoid any copyright violations.
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