What is a potential drawback of complete ownership in foreign direct investment?
Understand the Problem
The question is asking about the possible disadvantages associated with having complete ownership in foreign direct investment, specifically looking for an option that represents a drawback.
Answer
Displacement of local businesses.
A potential drawback of complete ownership in foreign direct investment is the displacement of local businesses, which can negatively affect the host country's economy.
Answer for screen readers
A potential drawback of complete ownership in foreign direct investment is the displacement of local businesses, which can negatively affect the host country's economy.
More Information
High levels of foreign direct investment, particularly when full ownership is involved, can lead to the displacement of local businesses as foreign companies often have larger resources and can outcompete local firms. This can lead to job losses and a reduction in local entrepreneurship.
Tips
Misunderstanding displacement as purely economic without considering broader social impacts can be a mistake. It's crucial to consider how displacement affects communities at large.
Sources
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