Voyevodins' Library _ "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Chapter 11 ... gross domestic product (GDP), gross fixed capital formation, gross national product (GNP), group, Heckscher-Ohlin theory, hedge fund, Helms-Burton Act, historic cost principle, home country, horizontal differentiation, horizontal foreign direct investment, host country, human development index, human resource management, import quota, individualism, individualism versus collectivism, inefficient market, infant industry argument, inflows of FDI, initial rate, innovation, integrating mechanisms, intellectual property, internal forward rate, internalization theory, International Accounting Standards Committee (IASC), international business, international division, International Fisher Effect, International Monetary Fund (IMF), international strategy, international trade, ISO 9000, joint venture, just-in-time (JIT), lag strategy, late-mover advantage, law of one price, lead market, lead strategy, lean production systems, learning effects

Voyevodins' Library _ "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Chapter 11 ... gross domestic product (GDP), gross fixed capital formation, gross national product (GNP), group, Heckscher-Ohlin theory, hedge fund, Helms-Burton Act, historic cost principle, home country, horizontal differentiation, horizontal foreign direct investment, host country, human development index, human resource management, import quota, individualism, individualism versus collectivism, inefficient market, infant industry argument, inflows of FDI, initial rate, innovation, integrating mechanisms, intellectual property, internal forward rate, internalization theory, International Accounting Standards Committee (IASC), international business, international division, International Fisher Effect, International Monetary Fund (IMF), international strategy, international trade, ISO 9000, joint venture, just-in-time (JIT), lag strategy, late-mover advantage, law of one price, lead market, lead strategy, lean production systems, learning effects Voevodin's Library: gross domestic product (GDP), gross fixed capital formation, gross national product (GNP), group, Heckscher-Ohlin theory, hedge fund, Helms-Burton Act, historic cost principle, home country, horizontal differentiation, horizontal foreign direct investment, host country, human development index, human resource management, import quota, individualism, individualism versus collectivism, inefficient market, infant industry argument, inflows of FDI, initial rate, innovation, integrating mechanisms, intellectual property, internal forward rate, internalization theory, International Accounting Standards Committee (IASC), international business, international division, International Fisher Effect, International Monetary Fund (IMF), international strategy, international trade, ISO 9000, joint venture, just-in-time (JIT), lag strategy, late-mover advantage, law of one price, lead market, lead strategy, lean production systems, learning effects

Voyevodins' Library ... Main page "International Business: Competing in the Global Marketplace" / Charles W.L. Hill ... Contents

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Chapter 11 Outline

Implications for Business

The implications of the material discussed in this chapter for international business are quite straightforward but no less important for being obvious. The growth of the global capital market has created opportunities for international businesses that wish to borrow and/or invest money. On the borrowing side, by using the global capital market, firms can often borrow funds at a lower cost than is possible in a purely domestic capital market. This conclusion holds no matter what form of borrowing a firm uses--equity, bonds, or cash loans. The lower cost of capital on the global market reflects their greater liquidity and the general absence of government regulation. Government regulation tends to raise the cost of capital in most domestic capital markets. The global market, being transnational, escapes regulation. Balanced against this, however, is the foreign exchange risk associated with borrowing in a foreign currency.

On the investment side, the growth of the global capital market is providing opportunities for firms, institutions, and individuals to diversify their investments to limit risk. By holding a diverse portfolio of stocks and bonds in different nations, an investor can reduce total risk to a lower level than can be achieved in a purely domestic setting. Once again, however, foreign exchange risk is a complicating factor.

The trends noted in this chapter seem likely to continue, with the global capital market continuing to increase in both importance and degree of integration over the next decade. Perhaps the most significant development will be the emergence of a unified capital market and common currency within the EU by the end of the decade as those countries continue toward economic and monetary union. Since Europe's capital markets are currently fragmented and relatively introspective (with the major exception of Britain's capital market), such a development could pave the way for even more rapid internationalization of the capital market in the early years of the next century. If this occurs, the implications for business are likely to be positive.

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