Transnationality. Cross-border Mergers and Acquisitions. Global Outflows. Global Inflows: The Foreign Direct Investment Network.

• Author: Rutsch, Horst
• Position: Statistical Data Included

Worldwide foreign direct investment (FDI) inflows by transnational corporations (TNCs) rose for the seventh consecutive year in 1997, according to the World Investment Report 1998: Trends and Determinants (WIR98), published by the United nations conference on Tarde and Development. Accounting for 90 per cent of all global outflows, developed countries also absorbed nearly two thirds of all inflows. The United States invested $115 billion abroad during 1997 and received $91 billion in inflows, accounting for more than one fifth of global inflows. In contrast, for the second successive year, Germany registered net FDI withdrawals. Japan invested $26 billion aborad and received $3 billion in 1997, a record figure, though still low compared to other developed economies. Outflows from the European Union reached $180 billion in 1997. However, FDI in developing countries has been catching up. On 1997, FDI flows to developing countries rose to $149 billion, accounting for 37 per cent of all global FDI, as compared to 17 percent ($34 billion) in 1990.

The eight in an annual series, WIR98 surveys FDI trends around the world, compiling data from 170 countries, and analyses the factors determining these investment flows, providing a comprehensive picture of the rapidly changing landscape of global business. Worldwide cross-border mergers and acquisitions (M&As) - mostly in banking, insurance, chemicals, pharmaceuticals and telecommunications - accelerated inflows to developed countries, which rose by almost a fifth, to $233 billion. Aimed at the global strategic positioning of firms in key industries, M&As reveal the prevailing strategies of TNCs: divesting non-core activities and strengthening competitive advantages through acquisitions in core activities.

The world's 100 largest TNCs have become increasingly globalized, and show a high degree of transnationality in terms of foreign assets, sales and employment. Generally, firms at the top of the composite transnationality index are from countries with small domestic markets. The top 50 TNCs headquartered in developing countries are catching up rapidly in their efforts to transnationalize. They have built up their foreign assets almost seven times faster than the world's top 100 TNCs between 1993 and 1996.

Latin America now tops developing regions in FDI growth. The region invested a record $9 billion abroad and received $56 billion - an increase of 28 per cent over 1996. The increase in inflows...