Foreign Investment Decisions essay
The contemporary business environment and globalized economy tend to the growing movement of capital. The elimination of fiscal barriers and the process of globalization contribute to the free movement of capital worldwide. In such a context, the capital generated in industrialized, well-developed countries can flow to less-developed and emerging economies. However, this trend is not as strong as it might have been taking into consideration the potential of less-developed and emerging economies (Van der Borght, 2000). In fact, investors in industrialized countries are interested in the export of capital because they need their capital working and brining them profits. Therefore, they look for new options to invest their capital (Gomory, 2002). In such a situation, less-developed and emerging economies seem to be attractive for investors from industrialized countries. However, they often prefer to invest in well-developed, industrialized economies instead of less-developed and emerging economies. For instance, many American investors prefer invest their capital in the EU and, vice versa, many European investors prefer to invest their funds into the US economy (Van der Borght, 2000). This trend can be explained by the stability of industrialized countries, whereas less-developed and emerging countries are unstable. The instability can be traced not only in the field of economy but also in the field of politics and social life.
Less-developed countries differ from emerging ones consistently. In fact, less-developed economies are characterized by the low level of economic development compared to well-developed industrialized countries. Instead, emerging economies are still less-developed compared to well-developed industrialized countries, but emerging economies are progressing fast (Ogbu, 1993). The growth of emerging economies outpaces that of the economies of industrialized countries that provide them with an opportunity to catch up and close the gap with well-developed industrialized countries.
