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1. Learning Outcomes

After studying this module students will be able to:

Know about Foreign Direct Investment

Learn about Foreign Institutional Investment

Understand the Difference between FII and FDI

Understand the Impact of FDI & FII on economy of India

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2. Introduction

Foreign investments are treasured by the developing countries for the simple fact that the
multinational companies (MNCs) not only deploy capital but also technology, processes,
knowledge, generate long term employment contributing in economic development of
their host countries which otherwise could not be arranged as conveniently by these
countries. Foreign investment refers to the flow of funds from one country to another
country in return for the claim in the form of ownership stakes of the concerned
companies or the assets of the companies. Generally, it involves the active participation
of the foreign investors in managing the capital, physical or technical investment in the
host country. Thereby, foreign investment is a broader term used for different concepts
like foreign direct investment (FDI) and foreign institutional investment (FII). The
following chapter provides a descriptive account of FDI and FII.

3. Foreign Direct Investment

Foreign Direct Investment or FDI can be defined as the investment made by an entity
residing in one country into an enterprise located in some foreign country. More
specifically, it is defined as the investment of foreign assets into domestic goods and
services. Its characteristics are:
a.) FDI signifies a long-term relationship between the investor and the enterprise which
unlike foreign institutional investments (FII) does not flow out of the country at the
first sign of trouble in an economy.
b.) The FDI generally involves the acquisition of management and voting rights with the
level of ownership greater than or equal to 10% of ordinary shares as the share
ownership less than 10% is categorized as FII.
c.) FDI involves both the initial and subsequent capital transactions between the investor
and the affiliated enterprise.
3.1 Classification of FDI

FDI can be classified into inward and outward FDI contingent on the direction of flow of
money.

a.) Inward FDI When the foreign assets (such as capital) are invested into a domestic
enterprise bringing the money into the base country then it is called as inward FDI.
This type of FDI is induced by the government by providing tax breaks, low interest
rates and grants.

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b.) Outward FDI - When the domestic assets (such as

capital) are invested into a foreign enterprise taking the money out of the base country
then it is called as outward FDI. This type of FDI is encouraged to increase economic
co-operation between the countries. It is essentially indicative of progressing firm and
economy looking out for foreign markets with the saturation of the domestic markets.

These investments can be achieved by a variety of channels such as green/brown field

investments, merger and acquisitions, joint ventures, franchising which have been
explained below:
a.) Joint Venture:
It is a strategic alliance between two or more parties (entities or individuals) coming
together to accomplish a joint specific task by pooling their resources and expertise. This
task can be anything ranging from expansion of existing business activity to a new
project. While, the venture has an individual identity distinct from that of the
joint venture

specific objective has been achieved, the joint venture ceases to exist.
Example: A Japanese firm having the technology, process and expertise in building
motorbikes entered into a joint venture with an Indian firm to establish a business in
India. This JV assisted the foreign firm to grasp the rules and regulation, the legal,
cultural and business environment, and the respective market. This joint venture
established the firm which came to be famously known as Hero Honda, a joint venture
between Honda headquartered in Japan and Hero headquartered in India.
A JV can be spearheaded in any of the following manners:
i.) Acquisition of some percentage of shares of a local company by the foreign
investor.
ii.) Acquisition of some percentage of shares of a foreign company by the local
firm.
iii.) Both foreign and local entrepreneurs collaborating to establish a new venture/
enterprise.
iv.) Both foreign and local entrepreneurs collaborating to establish a new venture/
enterprise along with the engagement of public capital and/or bank debt.

Merits and demerits of pursuing JV route have been described below beginning with the
merits of Joint Venture for the contracting parties:
i.) The companies get the opportunity to gain from new technology and
processes.
ii.) In a JV, both the parties benefit by gaining easy access to vast resources,
technology, specialized skills and staff of each other.

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iii.) The risk and thereby the associated cost of the

new venture gets distributed evenly among the partners of a JV reducing the
individual stakes of the members.
iv.) JV serves as a cost-effective method of entering an unknown foreign market
for a foreign firm with no knowledge of its market or the related business.
v.) Joint Venture also provides an option of conveniently exiting from a non-core
business engagement to both the contracting parties in a JV. The venture can
gradually be disengaged from the rest of the organization, thereby clearing the
path for its sale to the other partner. A significant number of joint ventures are
culminated in similar manner.
vi.) JV offers a flexible option of expansion to the business entities requiring
limited commitment and business exposure from them. JVs can have a
restricted life span with regards to the requirement of the project or the goal of
the venture.

The demerits of Joint Venture with the major area of conflict are:
i.) The imbalance in the expertise, investments and assets bought can become a
bone of contention between the contracting parties.
ii.) The difference in cultures and management styles often sows the roots of
dissatisfaction in the managers towards the whole JV project. If the integration
is not channelized through proper channel and expertise then JV have
experienced failure.
iii.) Different strategic views of different parties have often resulted in the
premature break-up of the joint venture. For example, the break-up of joint
ventures between Toyata-Kirloskar and Ford Mahindra owing to different
strategic views.
iv.) The technologically superior partner might not share technical expertise with
the other partner resulting in the loss of market to the fast advancing
competitors engaged in offering innovative products to the market. This
grievance served as one of the major reason causing the split between Hero
and Honda.
v.) The most recent popular split has been in the joint venture between Bharti and
Walmart. This split in the 6 year old joint venture occurred due the change in
the government policy that initially was favorable to foreign investment in
retail space permitting foreign brands to own majority stakes in their local
operation but later retracted under the political pressure.

b.) Merger and Acquisition or Cross-border acquisitions:

Mergers and acquisitions (M&A hereafter) are a method used in the consolidation of the
companies. While the merger is a process where two or more companies combine to form
a new company, acquisition is a process where one company is purchased by another

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company without the formation of any new company.

Both the structures result in the consolidation of the companies both ways: economically
as well as financially.
The companies are motivated mostly by the following two reasons to undertake the
M&A, being:
a.) M&A assists the companies in filling the gaps through strategic alliance in their
resources, offerings (i.e., products), processes, technologies or capabilities.
b.) M&A not only contributes in facilitating an entry into a new market with an
established revenue stream but also helps in addressing the issues of double
taxation and profit margin by achieving economies of scale.

Even though it is popular to hear M&A in the same breadth, the difference exists between
them:

S.No. Merger Acquisition

1. In mergers, two or more companies, In acquisition one company is acquired

often of similar size consolidate their by another company without the
operations and finances to form a new formation of a new entity as a by-
entity. product.

2. Merger generally takes place with the
harmonized conformity of the merging
parties mutually agreeing to
consolidate their business in the
interest of both the companies
The arrangement in which the
consolidation occurs against the accord
of the target company in the form of
hostile takeover by the acquiring firm,
thereby known as acquisition.

3. The new stocks of the new formed

entity are issued in return of the bought by the acquiring company
surrendered shares of both the merging resulting in the complete acquisition of
companies. its business.

4. The deal happens between parties of In this case, generally acquiring firm is
equal strength and might in the market. financially strong and bigger than the
target firm.

5. Merger being friendly association Acquisition being forceful association

result in sharing cost, profits and loss results in gobbling of the operations of
between the partnering entities. the weaker company by the richer
company.

6. This process basically yields a Acquisition, a decision taken during the

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synergistic output for both the firms in economic downturn assists the firms in
the form of increased operational and tiding over the challenges of downturn
managerial strength, and amplified
profits

Examples of some of the big M&A deals in India are:

i. A famous acquisition deal in the telecom sector occurred in February 2011
with the acquisition of approx. 67% shares for USD11.1 billion of Hutch
Essar by Vodafone.
ii. Indian pharmaceutical industry witnessed its first major M&A deal worth
USD 4.5 billion with the acquisition of Daiichi Sankyo, a Japanese
pharmaceutical firm by an Indian firm, Ranbaxy in 2008.
iii. Cross-border M&A took place in automobile sector with Tata Motors

Land Rover in March 2008 for USD 2.3 billion.

c.) Franchising
Franchising may be defined as a business arrangement where the firm grants the right or
privilege to another entity to sell its trademarked products and services in a specific
location for a fee. The fee structure comprises of two parts: an initial payment known as
up-front fee or franchise fee and periodic royalty payment taken as percentage of sales or
a fixed payment depending upon the respective agreement.
The popular examples of franchising agreement includes KFC, Pizza Hut, Mc Donald
among the restaurants; Marriot Hotels, Holiday Inn under Lodgings; Lakme Salon, Kaya,
Habibs under Salon segment, etc.
Two types of franchising arrangement exists:
i.) Direct-unit or Single unit franchise: is the most common and simple type of
franchise where the right is granted to the franchisee to open and operate only
a single franchise unit.
ii.) Multi-unit franchise: is the subsequent stage where on the successful
operation of the single unit of franchise, the franchisee can obtain the right to
open more than one unit. This can be achieved by two routes:
I. Area development franchise: grants the permission to the franchisee to
open more than one unit within a specific period of time in a specific zone
or territory.

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II. Master franchise: is an advanced form of

franchising where the franchisor sells the right to the franchisee for not
only opening and operating specified number of units in a specified zone
during specified period of time but also requires the master franchisee to
sell the franchises to other people in the zone expanding its business. The
master franchisee is also entrusted with the task of providing training and
support to the sub-franchises besides receiving respective fees and
royalties. Thus, its duties, tasks and benefits surpass that of the area
development franchise.
d.) Green and brown field investments
Greenfield investment- is a form of direct investment where a new venture is
established in a foreign country beginning from the scratch i.e., new operational facilities
for the stores or factories are established by the parent company. While the MNC benefits
from the access to the new unexplored market, the foreign country gains from the new
employment opportunities created for its population, exposure to new technology,
expertise and know-how. Thus, in order to attract more such FDI, the host country offers
tax breaks, subsidies, special zones and other lucrative incentives to the parent
companies.
Brownfield investment- is a form of direct investment where the parent companies do
not prefer to start from the scratch in a foreign destination. Instead the parent companies
adopt an alternative route by purchasing or leasing the production facilities that already
exists in host country to launch its own operation and production. In this manner the
parent companies save itself from the botherations of establishing a new infrastructure,
accessing legal and environmental permissions, and can make the required modifications
in the existing facilities saving time, energy and resources.
e.) Licensing
In simple terms license means to give permission. Similarly, licensing may be defined as
a written agreement between the two contracting parties where one party who is the
owner of the property grants permission to another party to use its property in exchange
for certain form of consideration. This property can be anything ranging from certain
activity, to delicate information, process or technology secluded by patent, trademark or
copyright i.e., it can be real, personal or intellectual. The consideration takes the form of
royalty payment or some fixed specified periodic amount to the holder of the proprietary
rights known as licensor by the licensee obtaining the right to use these rights for a
certain period of contractual time.
Internationally, Walt Disney, Sony, Fox, Warner Bros, Microsoft, Apple computers,
Google are some of the industry players signing significant number of licensing
agreement. This is a convenient method for the firms intending to enter the foreign
markets requiring neither substantial investments nor commitment of substantial funds.
The MNCs in this manner manages the political risk associated with entering a foreign
market by licensing it to the locally based partner in the foreign country.
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Merits and demerits of licensing are:

S.No. Merits Demerits

1. It provides instant and guaranteed The competition for the licensor company
revenue to the licensor at negligible increases in the market as the same
investment or investment production process is used by the
commitment. competitor for developing the same
product leaving no difference in the
product quality.

2. Promotes brand recognition in the
market with the use of its products
and processes by individual non-
related entities in a market space.
The licensor company faces the increasing
risk of losing the confidential information
of its valuable process knowledge to the
market threatening its unique selling
position.

3. The licensor enjoys the access to the The licensor loses the control over the
foreign markets without having to quality and thereby faces an increasing
make any direct investment nor threat to its brand value.
have to incur transportation cost
involved in exporting of products.

Difference between licensing and franchising channels of foreign direct investments:

The core significant difference between the license and franchise is that in franchising, a
significant control over the operation of the franchised product or process is exerted by
the franchisor, whereas, in case of licensing, the licensor neither have the right nor
interest in exercising the control over operations conducted by the licensee. The licensor
are basically interested in amassing their royalties and supervising the use of license.
3.2 Motivation for FDI

a.) Response to limited domestic growth: Either the intense competition or

saturation in the domestic market restricts the growth in the home country. The
firms thereby embark on an FDI option exploring new potential demand by
penetrating foreign markets. For example, the western automobile industry with
the saturation of domestic markets is busy exploring Asian markets through
various routes of FDI.
b.) Economies of Scale: The desire to realize the benefits of economies of scale and
appreciate their bottom lines (profits), the firms enters new markets where volume
selling is possible enabling the reduction of fixed costs. For example, Walmart

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one of the largest retail store worldwide armed

with big size benefits from the economies of scale through superior bargaining
powers with its suppliers, direct purchasing, inexpensive distribution, etc assisting
in lowering its cost, increasing its profit and also appreciating its competitive
advantages.
c.) Easy access to foreign resources and knowledge: Establishing a subsidiary or
joint venture facilitate the access to the knowledge of foreign technology,
resources, production process and other managerial skills prevailing in foreign
organizations. This knowledge is then used to upgrade their practices in other
affiliate enterprises/ subsidiaries globally. Whereas, the resources saves the
transportation cost of the firms.
d.) Lowering their production cost: By transferring or acquiring facilities in
countries where the core raw materials are available, the companies are able to
lower their cost and increase their profit. For example, China, Malaysia, Mexico
and India serve as the new favorable destinations in attracting FDI from the
foreign entities where cheap labor produces low cost and high quality goods and
services for them.
e.) Repercussions of trade barriers: The firms prefer establishing subsidiaries in
countries where their export volumes are high, however, the trade barriers in those
countries serves as a roadblock that reduces their export volumes impacting their
business.
f.) Response to : The companies also
establish subsidiaries in order to gain from local currency appreciation in future in
foreign countries.
g.) International Diversification: FDI helps both the firms and their shareholder to
diversify internationally without having to directly diversify their portfolio
holdings on a personal level. The possession of assets in the form of subsidiaries
automatically diversifies cash flows for the parent company. Thus, international
diversification strengthens the risk taking appetite of the firms and the
stakeholders enabling them to absorb risks should any of their risky undertakings
fail.
h.) Lure of timely knowledge update The goal to keep the company afloat amidst
the industry characterized by constantly changing technology, processes and
product innovation, stimulates the outward FDI. The FDI facilitates the access to
information and experience on innovation and research and development over a
period of to be utilized by the firm to update its own processes and products.

3.3 Stages of Penetration into Foreign Market

The first stage of penetration into foreign markets by the MNCs has generally been

the business interest in three countries India, China and Japan where its products are
exported in all these three nations. With passage of time, the firm grows in foreign
market and gathers the knowledge about the characteristics of those markets.
Subsequently, the increase
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in the foreign market paves the way for stage II of setting

a sales and distribution affiliate. The decision of establishing sales and distribution
affiliate in foreign market is a properly analyzed response to the demand from markets in
respective foreign countries. The company would not invest if the requirement is
insufficient to justify the investment despite having export market (phase I) in those
foreign countries. Hence, sales and distribution affiliate is established in two markets of
China & Japan only. Next the parent firm BRIO proceeds to stage III of entering into a

requirement exists in that country which turns out to be only India. Armed with proper

from parent firm to distribute and produce the product in India.

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PHASE IV:
Establishment of
PHASE III: FDI affiliate
Licensing
PHASE II: Agreement
Establishment of
PHASE I: Exports Sales &
Distribution
Subsidiary/
Affiliate

Though, BRIO must have been attracted by the relative benefit of higher profit vis-à-vis
negligible investment required in the licensing agreement compared to that in FDI, the
demerit in the form of limited control on its quality standards leads to stage IV.
Henceforth, post cancelling the license of fore
upon the acquisition of that firm and establishing its personal wholly owned subsidiary
i.e. opting for the FDI route.
Numerous reasons could have motivated such a decision of heavy direct investment in a
foreign country on the part of BRIO, such as decline in sales, appreciation in defects in
products, thereby customer complaints, or desire to expand its operation and thus market
in the country by offering superior quality products or even tax breaks and other
incentives offered by India.
Therefore, in essence this theory suggests that the expansion into foreign operations is a
gradual process whose first step begins from exporting. And it is not necessary for all the
parent firms having operations in different countries to rigorously follow these stages
from beginning to end. Different stages transpire in different countries for the same
parent firm which is basically a response to the demand of the respective markets (in
foreign countries) and also post-considering the political situation of the respective host
country. The exporting fundamentally provides an opportunity to the parent firm to
acquire all the knowledge about the market, competition and nation cost-effectively
before embarking upon an unfamiliar territory and setting up a business there. Exporting
facilitate the chances of the parent company to survive, succeed and realize the complete
benefit from its high risk investment.
3.4. Product Cycle Theory
The product life cycle states that FDI is a stage in the life cycle of the new product
launched in an oligopolistic market that exploits the product and factor market
imperfections (i.e., factors of production available at lower cost in different countries).
This theory was proposed by Raymond Vernon.
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The stages of a new product in product life cycle can be

summarized as:
a.) A new product which is a result of rigorous research and development getting
launched in the home market marks the first stage of its PLC. The firm in order to
capture the attention and some space of the market engages in product differentiation
through promotional and marketing techniques.
b.) Subsequently the second stage is defined by the production of standardized product
gaining from the economies in production and distribution. This is a stage where the
firm is compelled to begin looking beyond home market towards foreign market as
the domestic demand has been surpassed by the product output.
c.)
in the form of export. This stage provides the opportunity to the parent firm to spread
out its investments in research and development along with promotional expenditures
besides channelizing its surplus production towards the right direction- the foreign
market.
d.) Subsequently, with the passage of time when the firm has surpassed its heydays and
is approaching maturity with the expiry of its patent and market being flooded with
generics (look-alike) eroding its technical superiority, its profit margin witnesses a
fall. Therefore, this stage takes the firm a step ahead of exporting stage directing it to
look towards the establishment of manufacturing facility in foreign location. This
expansion offers the firm the chance to lower its cost and shield its eroding profits by
encashing on imperfections in factor market (i.e., factor of production- land or labor
or capital being available at lower cost).
e.) For instance, the US firms adopted established off-shore manufacturing facilities in
countries that could offer low-cost factors of production such as Taiwan or Mexico to
remain floating in the highly competitive electronics market. The low priced imports
from Japanese firms were eroding the profit margins and the markets of the US
producers.
Concluding Remarks: This theory perceives the FDI as a defensive mechanism or an
answer to the issue of neck-deep competition in both domestic and foreign markets.
Nevertheless, this theory is incapable of giving a standard process for all the MNCs
embarking on the FDI route.

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4. Foreign Institutional Investment

Foreign Institutional investment is defined as the investment made into the shares of a
firm by the foreign investors having no interest in the management of that firm. It
involves the transaction in highly liquid securities and other financial assets of the firm. It
is in complete contrast to the foreign direct investment which provides the investor with
the managerial control over the company; while FII investor has no controlling say in the
management of the company. It involves the purchase of shares in one or more foreign
companies, generally by the insurance or pension fund houses, without the gain of
controlling stakes in those companies. The equity investors holding less than 10% of
ordinary shares of the company are classified as foreign institutional investor. These

from the interest payments or in the form of non-voting dividends.

In the case of India, only those FIIs which are registered with SEBI are permitted to
purchase securities namely, shares, convertible debentures and warrants being issued by
Indian companies under the Portfolio Investment Scheme (PIS). Further NRIs can also
make investment into the securities of listed Indian companies under PIS provided they
have obtained permission from the designated branch of any AD Category - I bank.
However there are certain restrictions imposed by SEBI on the foreign institutional
investor. Both the FIIs and NRIs are prohibited strictly from investing into the capital of
the companies in Defence industry. They also cannot invest into the securities of chit
fund, Nidhi company, agricultural or plantation activities or real estate business.
Recently, SEBI created a new class of foreign investors in India known by the name of
Foreign Portfolio
being a fused product of numerous classes of existing investors
engaged in portfolio investment in India. The foreign institutional investor (FII), qualified
institutional investor (QFI) and sub-account of FIIs were fused to form FPI with the aim
of simplifying the investment experience of the foreign portfolio investors which earlier
had to adhere to different respective guidelines prior to making investment in India. Now
all these investors only have to observe the guideline issued by SEBI under FPI
Regulations by a notification dated January 7, 2014.

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5. Difference between FII and FDI

Though the root of both kinds of investments is same being the investment in the foreign
country, there still exists a difference between the two:

S.N Foreign Direct Investment Foreign Institutional Investment

o

1. Definition It is an investment made by the It is an investment made by an

parent company in the company of investor in the markets of the foreign
some foreign country. country.

2. Investments It involves the purchase of the stock It involves the purchase of shares in
made into of the foreign company to secure a one or more foreign companies,
controlling interest in that generally by the insurance or
company. It also includes the pension fund houses, without the
acquisition of non-financial assets gain of controlling stakes in those
e.g. technology and intellectual companies.
capital.

3. Managemen In this kind of investment, the The managerial responsibilities are

t parent company invests to take a
direct control of the foreign
company. The objective is to
assume managerial position in a
foreign company managing their
operations in foreign land forming
them their subsidiary.
left in the hands of the managing
board of companies only. The
investors - FII (insurance or pension
funds) in this case are concerned
only with the returns on their
investments without any intervention
by passively holding their securities.

4. Earnings The earnings of FDI occur in many The dividend earned from their
forms involving dividend, royalties investments in the stock or interest
and direct earnings from on bonds of foreign company forms
subsidiaries. the major source of earning for FII.

5. Liquidity FDI offers lesser liquidity to its
holders owing to its nature of
investments in fixed assets which
makes it difficult to sell.
Nevertheless, it offers a more stable
earnings option.
These form a highly liquid
investment asset where their sale and
trade is quite easy and convenient.
And it is because of its high liquidity
that these investments are more
volatile.

6. Strategy Long-term strategy is adopted by FII functions on the short-term

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the investors. perspective.

7. Merits The economy benefits from the The benefits attached with the FII
increase in the production, inflow is relatively lower in this
technology and management case. FII increases only the width
transfers, employable skills, and depth of stock exchanges
employment opportunities, revenue resulting in better price discoveries
receipts, standard of living and process for the scrips.
balance of payment.

6. Impact of FDI & FII on economy of India

Foreign investment is considered to be an important driver of economic growth,

particularly for developing economies as it forms the part of the investible sources
facilitating capital to the host country. The impact on the economy can be summarized
separately for FDI & FII.
a. Impact of FDI on economy of India
The advantages are as follows:
a.) The poverty in the host country witnesses a decline with the increase in the
growth and per capita income.
b.) The receipts for the host country increases through the increase in its tax revenue.
c.) The host country experiences a rich exposure to the developed skills owing to the
transfer of both technology and management from the foreign company.
d.) The labor forces enjoy an improved level of wages and salaries. This results in
increasing the standard of living within the economy.
e.) The economy also benefits from the surging access to the export markets.
f.) There is an overall development in the economy with the local producers
increasing their production in response to additional demand from host
companies.
g.) Both the balance of payment and capital accounts witnesses an improvement.
b. Impact of FII on economy of India
The advantages are as follows:
a.) With the investments focused on the capital market, the FII alleviates the
liquidity of the domestic capital market. For instance, the liquidity of the Indian
capital market has evidently witnessed a substantial appreciation in capital market
post the adoption of liberalization policy of 1991 that opened the gates for FIIs.

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b.) It increases the depth and breadth of the markets

financing wider range of investments. With more players accessing the markets,
the liquidity of the instruments being traded in these markets increases.
c.) Every player experiences a greater role with savers/investors finding additional
opportunities to invest and earn, while borrowers finding more and cheaper
avenues to borrow to finance their expansion or start-up new ventures.
d.) The corporate sector witnesses an increase in the adoption and implementation of
corporate governance (CG) practice. In order to having an edge in accessing the
capital markets economically and efficiently, the companies improve their
compliance of CG, accounting standards and transparency besides their
performance to better attract the investors in the market.
e.) The domestic capital market with the involvement of foreign investors gets
exposed to more sophisticated technology and tools assisting in refined analysis
techniques and better management of portfolios.
f.) The FII assists in promoting the development of domestic equity markets along
ch in turn nurture superior
CG practices in firms. Further, the takeovers shall also witness increased
preference when the equity markets are properly functioning. The takeovers
consequently not only turn around a poorly performing firm into a more profitable
and lucrative firm and increasing financial return to its investors but also
improves the return to the domestic economy.
g.) In essence, the FII brings discipline and know-how to the domestic capital
markets, strengthens the markets, develops functioning of both markets and the
corporates, and incentivizes higher disclosures and transparency, thereby better
CG practices in corporates. Consequently, the resources and capital is allocated
properly leading to the development in the economy.

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7. Summary
Foreign Direct Investment or FDI can be defined as the investment made by an entity
residing in one country into an enterprise located in some foreign country.
Joint Venture: It is a strategic alliance between two or more parties (entities or
individuals) coming together to accomplish a joint specific task by pooling their
resources and expertise.
Franchising may be defined as a business arrangement where the firm grants the right or
privilege to another entity to sell its trademarked products and services in a specific
location for a fee.
The product life cycle states that FDI is a stage in the life cycle of the new product
launched in an oligopolistic market that exploits the product and factor market
imperfections
Foreign Institutional investment is defined as the investment made into the shares of a
firm by the foreign investors having no interest in the management of that firm.
Foreign investment is considered to be an important driver of economic growth,
particularly for developing economies as it forms the part of the investible sources
facilitating capital to the host country

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