Podcast
Questions and Answers
What is the definition of Foreign Direct Investment (FDI)?
What is the definition of Foreign Direct Investment (FDI)?
- FDI occurs when a firm invests indirectly in new facilities in a foreign country
- FDI occurs when a firm invests in stock markets of a foreign country
- FDI occurs when a firm invests in international trade agreements
- FDI occurs when a firm invests directly in new facilities to produce and/or market in a foreign country (correct)
What does FDI stand for?
What does FDI stand for?
- Foreign Direct Investment (correct)
- Firm Developed Infrastructure
- Foreign Direct Income
- Foreign Domestic Investment
What is the criteria for FDI according to the U.S. Department of Commerce?
What is the criteria for FDI according to the U.S. Department of Commerce?
- An interest of 10 percent or more in a foreign business entity (correct)
- An interest of 20 percent or more in a foreign business entity
- An interest of 15 percent or more in a foreign business entity
- An interest of 5 percent or more in a foreign business entity
What are the two forms of Foreign Direct Investment (FDI) mentioned?
What are the two forms of Foreign Direct Investment (FDI) mentioned?
What do Outflows of FDI refer to?
What do Outflows of FDI refer to?
What was the percentage decline in Outward FDI from Bangladesh according to the World Investment Report 2023?
What was the percentage decline in Outward FDI from Bangladesh according to the World Investment Report 2023?
What has been the trend in the flow and stock of FDI over the last 30 years?
What has been the trend in the flow and stock of FDI over the last 30 years?
Which region has emerged as a significant destination for FDI in recent times?
Which region has emerged as a significant destination for FDI in recent times?
What factor has contributed to the growth of FDI according to the given information?
What factor has contributed to the growth of FDI according to the given information?
Which country has been the largest source country for FDI since World War II?
Which country has been the largest source country for FDI since World War II?
Why do firms prefer to acquire existing assets rather than opt for greenfield investments?
Why do firms prefer to acquire existing assets rather than opt for greenfield investments?
What is a reason cited in the text for firms choosing FDI over exporting?
What is a reason cited in the text for firms choosing FDI over exporting?
'Why Do Firms Choose Acquisition Versus Greenfield Investments?' What is one reason cited in the text for firms preferring acquisition?
'Why Do Firms Choose Acquisition Versus Greenfield Investments?' What is one reason cited in the text for firms preferring acquisition?
Study Notes
Foreign Direct Investment (FDI)
- FDI stands for Foreign Direct Investment.
- According to the U.S. Department of Commerce, FDI is a investment that meets the following criteria:
- A U.S. business enterprise is owned or controlled by a foreign person
- The foreign person owns or controls at least 10% of the business enterprise's voting securities
Forms of FDI
- There are two forms of FDI:
- Acquisitions (acquiring existing assets)
- Greenfield investments (establishing a new business)
Outflows of FDI
- Outflows of FDI refer to the flow of investments from a home country to a foreign country.
- According to the World Investment Report 2023, Outward FDI from Bangladesh declined by 15% in 2022.
Trend in FDI
- Over the last 30 years, the flow and stock of FDI have increased significantly.
- The Asia-Pacific region has emerged as a significant destination for FDI in recent times.
Factors Contributing to FDI Growth
- The growth of FDI is attributed to the increasing global connectivity and reduced trade barriers.
Largest Source Country for FDI
- Since World War II, the United States has been the largest source country for FDI.
Reasons for FDI Preference
- Firms prefer to acquire existing assets rather than opt for greenfield investments because it allows them to tap into existing markets, customer base, and technology.
- Firms choose FDI over exporting because it enables them to adapt to local market conditions and customer preferences.
- One reason cited for firms preferring acquisition is that it allows them to secure market share and competitive advantages quickly.
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Description
Learn about foreign direct investment (FDI) and the different forms it can take, such as joint ventures and wholly owned subsidiaries. Understand the concepts of greenfield investments, acquisitions, and mergers in the context of FDI.
