Handbook of Critical Issues in Finance
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Handbook of Critical Issues in Finance

Edited by Jan Toporowski and Jo Michell

This vital new Handbook is an authoritative volume presenting key issues in finance that have been widely discussed in the financial markets but have been neglected in textbooks and the usual compilations of conventional academic wisdom.
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Chapter 42: Transnational companies and finance

Grazia Ietto-Gillies


Transnational companies (TNCs) are companies that own assets and conduct direct business activities in at least two countries. There are several modalities of cross-countries business operations: from trade to joint ventures, franchising, licensing to foreign direct investment (FDI). It is the involvement in FDI that characterizes a company as transnational. Foreign direct investment can take place via greenfield investment – in which a plant, building, business is started from scratch – or via mergers and acquisitions (M & As), in which an existing foreign business is bought. Most FDI between World War I and World War II was directed towards developing countries and was mainly in the primary sector. The decades after World War II saw a surge in FDI, particularly in manufacturing, with a shift in geographical direction towards developed countries. In the last 35 or so years there has been considerable growth in FDI alongside a shift in the sectoral shares towards FDI in services worldwide.

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