9 Questions
What is foreign direct investment (FDI)?
The purchase of an asset in one country by an entity based in another country
What distinguishes FDI from foreign portfolio investment?
Direct control
What are the main determinants of FDI?
Growth prospects of the economy of the country
What is the difference between inorganic and organic FDI?
Inorganic FDI is made by buying a company in the target country, while organic FDI is made by expanding the operations of an existing business in that country
What is Hymer's framework on FDI?
A theory that explains why FDI occurs
What is the difference between capital investment and direct investment?
Direct investment allows firms to obtain a greater level of control than portfolio investment
What are the types of FDI investments?
Based on the perspective of the investor/source country and host/destination country
Which country was the largest foreign direct investment recipient in Europe in 2020?
France
Which country emerged as the top FDI destination in 2015, surpassing China and the US?
India
Study Notes
Foreign Direct Investment: A Summary
- Foreign direct investment (FDI) is the purchase of an asset, such as real estate or a controlling ownership in a business, in one country by an entity based in another country.
- FDI includes mergers and acquisitions, building new facilities, reinvesting profits, and intra-company loans.
- FDI is distinguished from foreign portfolio investment or foreign indirect investment by a notion of direct control.
- FDI 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.
- Hymer's framework on FDI explains why it occurs, since he considered that the previously mentioned theories could not explain foreign investment and its motivations.
- The difference between mere capital investment and direct investment is the issue of control, meaning that with direct investment firms are able to obtain a greater level of control than with portfolio investment.
- The main determinants of FDI are the side as well as growth prospects of the economy of the country when FDI is made.
- The types of FDI investments can be classified based on the perspective of the investor/source country and host/destination country.
- FDI flows are more likely to go countries with democratic institutions.
- In 2020, France was the largest foreign direct investment recipient in Europe, ahead of the UK and Germany.
- In 2015, India emerged as the top FDI destination surpassing China and the US.
- The United States has a fundamentally "open economy" and low barriers to FDI.
Test your knowledge about Foreign Direct Investment with this informative quiz! Learn about the basics of FDI, including its types, determinants, and Hymer's framework. Find out which countries are the top FDI destinations and discover the importance of democratic institutions in attracting FDI. This quiz is perfect for students, business professionals, and anyone interested in understanding the world of international investment.
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