Foreign Direct Investment

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This chapter seeks to identify the economic rationale that underlies Foreign Direct Investment. For example, why do some firms prefer FDI to exporting or licensing. Is the need for control, part of ... the answer? FDI occurs when a firm invests directly in facilities to produce and/or market a product in a foreign country. Once a firm undertakes FDI, it becomes a multinational enterprise (multinational = more than one country). FDI takes two forms: Greed-field investment: establishing a wholly new operation in a foreign country. Acquiring or merging with an existing firm in the foreign country. Investing in foreign financial instruments (Portfolio Investment) IS NOT FDI. Flow: The amount of FDI undertaken over a given period of time (usually one year). Stock: Total accumulated value of foreign-owned assets at a given time. [Show More]

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