A number of influential commentators have questioned why any enterprise would engage in foreign direct investment given the level of relevant risk. The high level of risk explains a significant level of home country bias in investment. Yet there are opportunities to make such investment and earn a good return. A clear and sensible decision rule is necessary which avoids both mistakes of poor selection and mistakes of omission. It is very important for decision makers to incorporate an accurate measure of such risk in their investment appraisal. This is not as easy as it seems. This book examines the various approaches to the incorporation of such risk, such as the capital assets pricing model and the real options approach, pointing out their shortcomings. It puts together recommendations which try to limit the complexity of the rule while at the same time suggesting a rule which has a theoretical justification.

List of Tables
List of Figures
Preface
Introduction
PART ONE: RISK AND A HOME COUNTRY BIAS
A Review of Theory Concerning Risk and the Foreign Investment Decision
Risk and Risk-Generating Events
Home Country Bias in Foreign Direct Investment
PART TWO: DIFFERENT PERSPECTIVES ON INVESTMENT APPRAISAL
The Investment Process and Decision Making: The Financial Perspective
The Investment Process and Decision Making: The Strategic Perspective
The Investment Process and Decision Making: The Organizational Perspective
PART THREE: THE DIFFERENT TYPES OF RISK
The Context of Risk
Country Risk
Enterprise and Project Risk
PART FOUR: RESPONSES TO RISK AND THE DETERMINANTS OF FDI
Responses to Risk
The Behaviours of FDI
Conclusion
Appendix 1
Appendix 2
Notes
Bibliography
Index

COLIN WHITE is Professor of Economics at the Graduate School of Management, La Trobe University, Australia. Professor White began his career with an interest in planning, moving on to research the comparative performance of national economies and later the economic performance of the enterprise. Formerly Head of Departments of Economic History, Economics and the Graduate School of Management (inaugural), his most recent book is Strategic Management.

MIAO FAN has an international background having studied and worked in China, holding an MBA from Britain and a PhD from Australia for her thesis on Country Risk and its Impact on the FDI Decision-making Process from an Australian Perspective. She now works in the risk management team at the National Australia Bank.