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Evaluating foreign direct investments: new challenges for strategic planners

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  • M J Foster

    (Kingston Business School)

Abstract

Business and hence strategic planning is becoming increasingly international. Within that internationalisation, foreign direct investment (FDI) has become increasingly important, especially in E/SE Asia. A logical step then is to seek appropriate methods for modelling and evaluating those FDIs. Excluding the core financial appraisal the literature is sparse. This paper describes an empirical examination of these issues based on a sample from the UK's top 250 listed companies. The results of responses to a questionnaire are described with elaboration gleaned from eight detailed, follow up interviews. The picture to emerge is one of systematic treatment of the basic financial calculations but fairly rudimentary modelling of non-financial aspects. The treatment of risk was most typically through amendment of cash flows for core business risks and adjustment of the hurdle rate for ‘wilder’ risks. There is discussion of some of the subtler points of ‘wild’ risk's treatment and some outline suggestions for models to tackle other non-financial aspects of overall project evaluation. It is also suggested that the thinking developed may be applicable to a wider class of investment proposals.

Suggested Citation

  • M J Foster, 2000. "Evaluating foreign direct investments: new challenges for strategic planners," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 51(1), pages 45-52, January.
    • Handle: RePEc:pal:jorsoc:v:51:y:2000:i:1:d:10.1057_palgrave.jors.2600790
    DOI: 10.1057/palgrave.jors.2600790
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    Cited by:

    1. Verico, Kiki, 2012. "The Impact of Intra Regional Trade Agreement on FDI Inflows in Southeast Asia: Case of Indonesia, Malaysia and Thailand," MPRA Paper 42087, University Library of Munich, Germany, revised 20 Oct 2012.
    2. Janna Mai Nguyen & Dodo zu Knyphausen‐Aufseß, 2016. "The Role of Sovereign Ratings in M&A Markets: Empirical Evidence from Latin America and South East Asia," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 25(1), pages 5-48, January.
    3. Janna Mai Nguyen & Dodo zu Knyphausen‐Aufseß, 2014. "The Impact of Sovereign Credit Ratings on Corporations: A Literature Review and Research Recommendations," Financial Markets, Institutions & Instruments, John Wiley & Sons, vol. 23(3), pages 125-178, August.

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