Download Impact of Macro-Economic Factors to Foreign Direct Investment

University of Latvia Faculty of Business, Management and Economics
IMPACT OF MACRO-ECONOMIC FACTORS TO FOREIGN DIRECT INVESTMENT
DECISIONS FOR GERMAN AND AUSTRIAN AUTOMOTIVE INDUSTRIES
Helmut Birnleitner
University of Latvia
Aspazijas bulv. 5, Riga, LV-1050, Latvia
E-mail address: [email protected]
Objective: German and Austrian Companies of the Automotive Industry who are planning to go abroad with
production sites are forced by many different influence factors. Internationalization and open markets with low entry
barriers made business activities more transparent and the competitive pressure increased. Reasons for Foreign Direct
Investments (FDI) are complex and driven by different forces e.g. covering upcoming demands, serve new markets,
demand of resources, reducing transports, etc. These circumstances may bring risks and uncertainties for companies
and their organizational and financial situation. The objective of this research paper is to evaluate the influence of
macro-economic factors to foreign direct investment decisions. It is not the aim of this work to evaluate internal
influence factors, such as production processes, products, quality issues, etc. This research paper focuses on to the
macro-level and evaluates the influence of external economic factors to the decision process of doing FDI or not.
Methods/Data: Factors which affecting FDI decisions, according to literature research, is mainly driven by
three different main aspects: Supply Factors, Demand Factors and Government Factors. Each of these factors is set-up
by different sub factors, which are as follows: Supply Factor: Production Cost, Logistics, Resource Availability and
Access to Technology; Demand Factors: Customer Access, Follow Clients, Follow Rivals and Exploitation of
Competitive Advantage; Government Factors: Economic Priorities, Avoidance of Trade Barriers and Economic
Development Incentives. Managers and Decision makers of companies have been asked about their allocation of
importance and risk to each of these factors for the decision process of doing FDI or not.
Results/Conclusions: Macro-Economic factors are of essential importance in globalization processes and
influence companies who intent to invest into foreign countries. These factors can be influenced by governmental
incentives and stability. As a conclusive summary following results can be derived: Factors such as GDP real growth
rate and low tax rates of profit as well as incentives for green buildings are of high importance for FDI decisions.
Transparency (stable governmental situations) is also of importance in terms of minimizing risks of FDI decisions.
Key words: Foreign Direct Investments (FDI), Globalization, Macro-Economic Factors
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Latvijas Universitates 75. Conference, Riga, 2017