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International economics question - What are the basic motivations that cause a firm to invest abroad...

International economics question - What are the basic motivations that cause a firm to invest abroad rather than export (or outsource production to national firms)?

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Answer #1

The foreign investment is for a business in the sense that was controlling ownership in the country. The primary reasons for firms investing abroad are because of,

Resource seeking

It is an essential motive of the business. They seek resources which are not available in the home country. Especially the natural resources or raw materials which is cheaper in the host countries.

Market-seeking

Seeking the new market is another motive for the business. It is because of checking foreign production possibilities, reduce the cost of serving the domestic market.

Efficiency-seeking

It is like firms take advantages in differences in cost and availability of factor endowments and economies of scale and scope.

Asset seeking

It is because of firms seeking a new technological base for their production.

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