Question

For each of the following, specify whether the foreign direct investment is horizontal or vertical; in addition, describe whether that investment represents an FDI inflow or outflow from the countries that are mentioned.

a. Vodafone (a U.K.-based company) plans to improve its network and services in Romania after the results in this market lagged behind other countries.

b. General Electric (an American company) buys Alstom (another American company) energy assets.

c. Exxon (an American company) plans the construction of new delayed coker unit in Belgium.

d. PetroChina (a Chinese company) plans to invest in global oil and natural gas assets in a venture in Western Australia.

Answer 1

a. Vodafone investments are horizontal as the product is the same as the home country and it is an outflow of FDI from the UK.

b. No FDI investment involved.

c. FDI inflows to Belgium, as the investment is vertical.

d. FDI outflows from China to inflows to western Australia, investment type is horizontal.