Chapter 8 - Foreign direct investment. When you finish this chapter, you should be able to: Recognize current trends regarding foreign direct investment (FDI) in the world economy, explain the different theories of FDI, understand how political ideology shapes a government's attitudes toward FDI, describe the benefits and costs of FDI to home and host countries,. | Global Business Today 8e by Charles . Hill Chapter 8 Foreign Direct Investment Introduction Question: What is foreign direct investment? Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country Once a firm undertakes FDI it becomes a multinational enterprise There are two forms of FDI: A greenfield investment - the establishment of a wholly new operation in a foreign country Acquisition or merging with an existing firm in the foreign country FDI in the World Economy There are two ways to look at FDI: The flow of FDI refers to the amount of FDI undertaken over a given time period The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time Outflows of FDI are the flows of FDI out of a country Inflows of FDI are the flows of FDI into a country Both the flow and stock of FDI in the world economy has increased over the last 20 years FDI in the World Economy Question: Where is most FDI directed? Historically, most FDI has been directed at the developed nations of the world, with the . being a favorite target FDI inflows have remained high during the early 2000s for the United States, and also for the European Union South, East, and Southeast Asia, and particularly China, are now seeing an increase of FDI inflows Latin America is also emerging as an important region for FDI Important source countries - the ., the UK, the Netherlands, France, Germany, and Japan FDI in the World Economy Question: What form does FDI take? The majority of cross-border investment involves mergers and acquisitions rather than greenfield investments Acquisitions are attractive because: They are quicker to execute than greenfield investments It is easier and less risky for a firm to acquire desired assets than build them from the ground up Firms believe they can increase the efficiency of an acquired unit by transferring capital, technology, or management skills Theories of FDI . | Global Business Today 8e by Charles . Hill Chapter 8 Foreign Direct Investment Introduction Question: What is foreign direct investment? Foreign direct investment (FDI) occurs when a firm invests directly in new facilities to produce and/or market in a foreign country Once a firm undertakes FDI it becomes a multinational enterprise There are two forms of FDI: A greenfield investment - the establishment of a wholly new operation in a foreign country Acquisition or merging with an existing firm in the foreign country FDI in the World Economy There are two ways to look at FDI: The flow of FDI refers to the amount of FDI undertaken over a given time period The stock of FDI refers to the total accumulated value of foreign-owned assets at a given time Outflows of FDI are the flows of FDI out of a country Inflows of FDI are the flows of FDI into a country Both the flow and stock of FDI in the world economy has increased over the last 20 years FDI in the World Economy Question: Where is .
