MANAGING EXPOSURE OF DIRECT FOREIGN INVESTMENT TO POLITICAL RISK: THE CASE OF FOOD BUSINESSES IN CHINA

Yan Liu and Bruce Bjornson

International Food and Agribusiness Management Review, 1998, vol. 01, issue 3, 14

Abstract: Direct foreign investment (DFI) allows a multinational corporation (MNC) to generate and appropriate extra-normal profits from its unique assets in a foreign market. China has become increasingly attractive for foreign investment over the past 20 years. This entails political risk, but MNCs can reduce the risk by relying heavily on MNC-specific assets, often in the form of tacit knowledge. A joint venture with a local partner creates an incentive for a local stakeholder to shield the DFI from political risks and allows the partner to contribute location-specific assets to the venture, further reducing the MNC's risk.

Keywords: Agribusiness; International Relations/Trade (search for similar items in EconPapers)
Date: 1998
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Persistent link: https://EconPapers.repec.org/RePEc:ags:ifaamr:34511

DOI: 10.22004/ag.econ.34511

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