foreign direct investment


  • In contrast, if interest rates were the main motive for international investment, FDI would include many industries within fewer countries.

  • The origin of the investment does not impact the definition, as an FDI: the investment may be made either “inorganically” by buying a company in the target country or “organically”
    by expanding the operations of an existing business in that country.

  • Methods The foreign direct investor may acquire voting power of an enterprise in an economy through any of the following methods: • by incorporating a wholly owned subsidiary
    or company anywhere • by acquiring shares in an associated enterprise • through a merger or an acquisition of an unrelated enterprise • participating in an equity joint venture with another investor or enterprise Forms of FDI incentives[edit]
    Foreign direct investment incentives may take the following forms:[7] • low corporate tax and individual income tax rates • tax holidays • other types of tax concessions • preferential tariffs • special economic zones • EPZ – export processing
    zones • bonded warehouses • maquiladoras • investment financial subsidies[8] • free land or land subsidies • relocation & expatriation • infrastructure subsidies • R&D support • energy[9] • derogation from regulations (usually for very large
    projects) FDI FDI flows are more likely to go countries with democratic institutions.

  • A foreign direct investment (FDI) is an investment in the form of a controlling ownership in a business in one country by an entity based in another country.

  • [citation needed] A 2008 study by the Federal Reserve Bank of San Francisco indicated that foreigners hold greater shares of their investment portfolios in the United States
    if their own countries have less developed financial markets, an effect whose magnitude decreases with income per capita.

  • In a narrow sense, foreign direct investment refers just to building new facility, and a lasting management interest (10 percent or more of voting stock) in an enterprise
    operating in an economy other than that of the investor.

  • The difference between the two, which will become the cornerstone of his whole theoretical framework, is the issue of control, meaning that with direct investment firms are
    able to obtain a greater level of control than with portfolio investment.

  • “[12] China[edit] FDI in China, also known as RFDI (renminbi foreign direct investment), has increased considerably in the last decade, reaching $19.1 billion in the first
    six months of 2012, making China the largest recipient of foreign direct investment at that point of time and topping the United States which had $17.4 billion of FDI.

  • [28] A major source of investment is real estate; the foreign investment in this area totaled $92.2 billion in 2013,[citation needed] under various forms of purchase structures
    (considering the U.S. taxation and residency laws).

  • Another observation made by Hymer went against what was maintained by the neoclassical theories: foreign direct investment is not limited to investment of excess profits abroad.

  • [10] A 2010 meta-analysis of the effects of foreign direct investment (FDI) on local firms in developing and transition countries suggests that foreign investment robustly
    increases local productivity growth.

  • Hymer’s importance in the field of international business and foreign direct investment stems from him being the first to theorize about the existence of multinational enterprises
    (MNE) and the reasons behind FDI beyond macroeconomic principles, his influence on later scholars and theories in international business, such as the OLI (ownership, location and internationalization) theory by John Dunning and Christos Pitelis
    which focuses more on transaction costs.

  • These theories were based on the classical theory of trade in which the motive behind trade was a result of the difference in the costs of production of goods between two
    countries, focusing on the low cost of production as a motive for a firm’s foreign activity.

  • Countries with fewer capital controls and greater trade with the United States also invest more in U.S. equity and bond markets.

  • As opposed to traditional macroeconomics-based theories of investment, Hymer states that there is a difference between mere capital investment, otherwise known as portfolio
    investment, and direct investment.

  • Horizontal FDI arises when a firm duplicates its home country-based activities at the same value chain stage in a host country through FDI.

  • Moreover, he clarifies that FDI is not necessarily a movement of funds from a home country to a host country, and that it is concentrated on particular industries within many

  • Removal of conflicts: conflict arises if a firm is already operating in foreign market or looking to expand its operations within the same market.

  • [3] FDI, a subset of international factor movements, is characterized by controlling ownership of a business enterprise in one country by an entity based in another country.

  • Foreign direct investment is distinguished from foreign portfolio investment, a passive investment in the securities of another country such as public stocks and bonds, by
    the element of “control”.

  • Moreover, “the efficiency-value creation component of FDI and MNE activity was further strengthened by two other major scholarly developments in the 1990s: the resource-based
    (RBV) and evolutionary theories”[5] In addition, some of his predictions later materialized, for example the power of supranational bodies such as IMF or the World Bank that increases inequalities (Dunning & Piletis, 2008).

  • However, it must be taken into account that a reduction in conflict through acquisition of control of operations will increase the market imperfections.

  • Intrigued by the motivations behind large foreign investments made by corporations from the United States of America, Hymer developed a framework that went beyond the existing
    theories, explaining why this phenomenon occurred, since he considered that the previously mentioned theories could not explain foreign investment and its motivations.

  • In fact, foreign direct investment can be financed through loans obtained in the host country, payments in exchange for equity (patents, technology, machinery etc.

  • 2052; 113th Congress), a bill which would direct the United States Department of Commerce to “conduct a review of the global competitiveness of the United States in attracting
    foreign direct investment”.

  • Platform FDI Foreign direct investment from a source country into a destination country for the purpose of exporting to a third country.

  • [30] Supporters of the bill argued that increased foreign direct investment would help job creation in the United States.


Works Cited

[‘1. “Foreign Direct Investment Definition from Financial Times Lexicon”. Archived from the original on 8 April 2019. Retrieved 13 September 2014.
2. ^ “Foreign direct investment, net inflows (BoP, current US$) | Data | Table”.
Retrieved 17 November 2012.
3. ^ “CIA – The World Factbook”. Archived from the original on 1 December 2017. Retrieved 17 November 2012.
4. ^ Ietto-Gillies, Grazia (2012). Transnational corporations and international production: Concepts,
theories and effects. Cheltenham, UK; Northampton, MA: Edward Elgar. ISBN 978-0-85793-225-9.
5. ^ Dunning, John H.; Pitelis, Christos N. (2008). “Stephen Hymer’s contribution to international business scholarship: An assessment and extension”.
Journal of International Business Studies. 39 (1): 167–176. doi:10.1057/palgrave.jibs.8400328. ISSN 0047-2506. S2CID 153551822. Retrieved 12 July 2019.
6. ^ “Goal 10 targets”. UNDP. Archived from the original on 27 November 2020. Retrieved 23 September
7. ^ U.S. States regularly offer tax incentives to inbound investors. See, for example, an excellent summary, written by Sidney Silhan, of state tax incentives offered to FDI businesses at: BNA Portfolio 6580, U.S. Inbound Business Tax Planning,
at p. A-71.
8. ^ ≥
9. ^ Sarkodie, Samuel Asumadu; Adams, Samuel; Leirvik, Thomas (1 August 2020). “Foreign direct investment and renewable energy in climate change mitigation: Does governance matter?”. Journal of Cleaner Production. 263: 121262.
doi:10.1016/j.jclepro.2020.121262. ISSN 0959-6526.
10. ^ Jensen, Nathan M. (2008). Nation-States and the Multinational Corporation: A Political Economy of Foreign Direct Investment. Princeton University Press. ISBN 978-1-4008-3737-3.
11. ^ Tomas
Havranek & Zuzana Irsova (30 April 2011). “Which Foreigners are Worth Wooing? A Meta-Analysis of Vertical Spillovers from FDI”. Retrieved 17 September 2012.
12. ^ Jump up to:a b How can Europe reset the investment agenda now to
rebuild its future?, EY, 28 May 2020
13. ^ “China tops U.S. as investment target in 1st half 2012: U.N. agency”. Reuters. 24 October 2012. Archived from the original on 24 September 2015. Retrieved 24 October 2012.
14. ^ “The fDi Report 2014 –
Asia Pacific”. fDi Magazine. 25 June 2014. Retrieved 17 July 2014.
15. ^ “FDI by Country”. Greyhill Advisors. Retrieved 15 November 2011.
16. ^ “Foreign Investment Law of the People’s Republic of China”. Retrieved 19 November 2019.
17. ^
“Why do you become ‘Singham’ for US, not for India? Narendra Modi asks Manmohan Singh”. The Times Of India. 28 September 2012. Retrieved 13 December 2012.
18. ^ “BJP will break records”. The Times Of India. 13 December 2012. Retrieved 13 December
19. ^ “Derecognition of overseas corporate bodies (OCBs)” (PDF). 8 December 2003. Retrieved 16 September 2012.
20. ^ Airlines: Govt OK’s 49% FDI stake buy. Indian Express (14 September 2012). Retrieved on 28 July 2013.
21. ^
“FDI Limit in Insurance sector increased from 26% to 49%”. Retrieved 10 July 2014.
22. ^ “China Edges Out U.S. as Top Foreign-Investment Draw Amid World Decline”. Wall Street Journal. 23 October 2012.
23. ^ “India pips US,
China as No. 1 foreign direct investment destination”. The Times of India. Times News Network. Retrieved 1 October 2015.
24. ^ “India Pips China, US to Emerge as Favourite Foreign Investment Destination”. Retrieved 1 October 2015.
25. ^
Jump up to:a b c “White House Touts Growing Foreign Direct Investment In The U.S. accepted ngp”. ABC News. 20 June 2011. Retrieved 2 November 2012.
26. ^…/fdiesaissuebriefno2061411final_0.pdf[permanent dead
27. ^[bare URL]
28. ^ “U.S. FDI and site selection”. Greyhill Advisors. Archived from the original on 15 October 2011. Retrieved 19 October 2011.
29. ^ “Why Do Foreigners Invest in the United States?”
(PDF). Federal Reserve Bank of San Francisco. October 2008. Retrieved 17 November 2012.
30. ^ “H.R. 2052 – Text”. United States Congress. p. Section 4(a). Retrieved 11 September 2013.
31. ^ Kasperowcz, Pete (9 September 2013). “House passes bill
aimed at boosting foreign direct investments in the U.S.” The Hill. Retrieved 11 September 2013.
32. ^ November 2021, Assel Satubaldina in Business on 22 (22 November 2021). “Kazakhstan Leading in FDI Stock Value from Eurasian Economic Union Countries”.
The Astana Times. Retrieved 23 November 2021.
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