Foreign Direct Investment (FDI)

A foreign investment (FDI) is a company controlled through ownership by a foreign company of foreign individuals. Control must accompany the investment; otherwise it is a portfolio investment. Companies want to control their foreign operations so that these operations will help achieve their global objectives. Investors who control an organization are more willing to transfer technology and other competitive assets. The idea of denying rivals access to resources is called the appropriability theory. Governmental authorities …

…do direct investments serve to enhance global economic efficiency? FDI transfers resources to where they can be used more effectively and will enable a better use of the local resources. Eventually FDI may lead to better global use of resources. FDI will employ laborers from emerging economies who otherwise may not find work and at the same time it will create a need for more highly paid managerial personnel at the company's home country headquarters.