Foreign direct investment motives and location decision factors under economic recession: Three cases of Finnish FDI in Portugal

The purpose of this thesis was to study how uncertainty in economic conditions of the FDI host country affects location decision of an investment, and what kinds of motives are behind the investment decision to a country in economic recession, in this case Portugal. The country has attracted foreign direct investment steadily, but it is evident that most multinational firms and investors tend to be more interested in emerging economies in general. The aim was to find out also which host country specific advantages are important in this kind of cross-border investment and which factors are important for an FDI to succeed under economic uncertainty at the host country. The study was done by analyzing three Finnish case companies: a private equity and real estate investment firm Pontos Group, A wave energy technology research and development company AW Energy and NSN, Nokia Solutions and Networks, a global telecommunications company. The research was done empirically, by interviewing experts on the subject, mainly persons representing these companies. In addition relevant articles, journals and content from case companies’ web-pages is used for the desk research regarding the topic. The results of this thesis showed that the FDIs with strategic asset-seeking investments seem most profitable FDI types under uncertain economic conditions. This kind of investments aim to strengthen the company’s long-term strategy, including the time after recession. Firm-specific ownership advantages that bring competitive advantage proved out to be important under these circumstances, as well as first-mover advantages and externally created assets such as government promotional policies regarding FDI incentives. Also the location was considered suitable for resource- or efficiency seeking motives, based on the lowered price level at the host country. Problems were related mainly to financing, but as foreign companies receive financing usually from their home countries, the economic recession of the host country does not have significant effect for FDI decision, according to this study

Uncertainty Management in Acquisitions: What Scenario Analysis Could Offer

This study answers to How scenario analysis could help acquiring companies to reduce uncertainty in the acquisition process? It is due to the mismatch between academic world’s caveat emptor and business world’s eagerness to pursue acquisitions that motivated this study. Acquisitions are as popular as ever, thus, managing the uncertainty surrounding these transactions is relevant. This study creates a generic theoretical model with a strategy-level scope. Thus, the study does not discuss nor does it seek answers to operational issues related in both fields. This study is explorative and constructivist in nature. It discusses briefly the concepts and relatedness of risk and uncertainty and establishes a hierarchy between these two: Risks being a “sub-section” of uncertainty, although not with clear boundaries. Acquisition theory follows the process view that understands acquisitions as a process with various levels – some strategic, some operational. Scenario analysis is presented as tool for management to enrich their strategic discussion and understand their future options. The empirical data collection is done through interviewing. The results are reflected on literature on strategic management, scenario literature, and on a consultancy’s report picturing firm’s strategies in accordance with their acquisition processes. The study has an abductive approach as it tries to combine multiple views and generates discussion between literature review, interviews, the report, and second round of literature. The model suggests three propositions: First, at the strategic decision making level, when the decision whether or not to pursue an acquisition growth strategy has been made, it provides firms new data and enriches the strategic discussion. Second, when the acquisition strategy has been created, it can be applied as a tool to measure possible acquisition targets against the backdrop of the first set of scenarios. Third, due to the scenario analysis’ requirement to include people with various backgrounds and from multiple levels of the corporate hierarchy, it could help managers to avoid biases stemming from hubris.