Comparative Analysis of the Foreign Investment Evaluation Practices by U.S.-Based Manufacturing Multinational Companies
AbstractA large sample of U.S.-based manufacturing multinational companies were surveyed regarding their investment valuation practices. It was found that: (a) Foreign Direct Manufacturing Investment (FDMI) is motivated primarily by profit rather than the recently proposed behavioral considerations; (b) the majority of companies practice project-by-project analysis of the simple accept/reject type, rather than the comparative project analysis advocated by financial analysts; (c) most of the companies utilized criteria for single investments, cash-flows, and cost of capital that were in general agreement with the analytical literature; (d) companies were concerned more with business risk than currency and political risks—moreover, all three types of risk were evaluated subjectively and accounted through adjustments in the required rates of return rather than the cash flows of the FDMI, as specified in financial research; (e) analysis of demographic and behavioral variables for possible relationships to FDMI evaluation practices yielded interesting but variable specific results. The questionnaires were mailed in May 1979 and the personal interviews were conducted during December 1979 and the first six months of 1980.© 1982 JIBS. Journal of International Business Studies (1982) 13, 19–42
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Volume (Year): 13 (1982)
Issue (Month): 3 (September)
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Departmental Working Papers
200903, Rutgers University, Department of Economics.
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