Trade and the Multinational Enterprise Coursework - 4

Trade and the Multinational Enterprise - Coursework Example Market size and economic stability are found to be main motivations for investment. The findings provide an opportunity for justification of the study hypotheses as well as future recommendations. The case study given is the German FDI in China. China is the third leading country beneficiary of the Foreign Direct Investment. In 2003-2004, the country realized the highest investment with Germany been one the countries that invested greatly in China. Since then, the trade ties between the two countries have steadily been increasing. Currently, there are more than 1500 Germany firms that have invested in China. In point of fact, Germany is the leading European country trading partner with China. Research conducted by scholars Bernard and Jensen in 2002 showed that there were approximately $ 51.7 billion of FDI in China. In 2003, foreign investment increased up to $ 53 billion (China Statistics, 2007). The country attracted $ 61 billion in 2004. From the statistics, it can be seen that the FDI index has been increasingly drastically. Furthermore, the FDI index was ranked the top position. A study conducted by the Financial Times noted that in developing states, the Republic of Ch ina is the largest foreign direct investment beneficiary country. The research explores the OLI paradigm in the context of German FDI in China. OLI is an abbreviation for Ownership, Location, and Internalization (Agarwal, Gubitz & Nunnenkamp, 2006). The three are prime bases that underlie an enterprise’s decision to grow in a multinational company. In the context of this paper, ownership advantages help addresses the subject of why some companies go abroad and not others. Location advantages answers the question of which is the most appropriate location to establish a firm in a foreign country. Lastly, internalization focuses on the influences of a firm’s operation in