International Trade and Business Growth - Foreign direct investment (FDI) and link to business growth - 4.1.2
Foreign Direct Investment - is investment made by a business or other entity from one country into the production capacity of a business or other entity from another country e.g. factories
Inward FDI / Horizontal FDI - An investment into a country involving an external or foreign company either investing in or purchasing the goods of a local economy.
Outward FDI / Vertical FDI - A business strategy in which a domestic firm expands its operations to a foreign country via an investment, merger/acquisition or expansion of an exisiting foreign facility.
FDI can be used by businesses to achieve the aim of growth. Countries try to attract FDI using strategies such as lower levels of corporation tax, subsidies for the building of factories, and investment in infrastructure such as roads, ports and airports.
It was originally believed that FDI occurred due to differing interest rates in different countries. Businesses would transfer money globally to where they could obtain the highest interest rate. Other theories believe that businesses cluster production together geographically or operate in countries that are close to them geographically.
Inward FDI / Horizontal FDI - An investment into a country involving an external or foreign company either investing in or purchasing the goods of a local economy.
Outward FDI / Vertical FDI - A business strategy in which a domestic firm expands its operations to a foreign country via an investment, merger/acquisition or expansion of an exisiting foreign facility.
FDI can be used by businesses to achieve the aim of growth. Countries try to attract FDI using strategies such as lower levels of corporation tax, subsidies for the building of factories, and investment in infrastructure such as roads, ports and airports.
It was originally believed that FDI occurred due to differing interest rates in different countries. Businesses would transfer money globally to where they could obtain the highest interest rate. Other theories believe that businesses cluster production together geographically or operate in countries that are close to them geographically.
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