What is Foreign Direct Investment (FDI)?

What is Foreign Direct Investment (FDI)?

• A. Investment in local businesses
• B. Investing indirectly in foreign markets
• C. Directly investing in activities that control and manage value creation in other countries
• D. Government funding for international companies

Answer: (C)

Foreign Direct Investment (FDI) refers to the practice where an individual or business invests directly in physical assets or enterprises in a foreign country with the intention of establishing a lasting interest and controlling the operations of those assets. This can include setting up a subsidiary, acquiring a company, or expanding existing operations outside one's home country. The key aspect of FDI is the element of control; by directly investing in foreign markets, investors are not just providing capital but are also engaged in the management of their investment, guiding decision-making processes, and directing how value is created. This contrasts with other forms of investment that may not provide the same level of involvement or influence in foreign operations. While investment in local businesses and government funding for international companies pertain to different contexts of investment, they do not capture the essence of FDI, which is characterized by direct control and management through capital infusion into foreign assets. Similarly, indirect investments do not involve the same level of engagement or oversight in the operations of the invested assets. Thus, the correct understanding of FDI centers around the direct connection and active management in foreign business ventures.

Foreign Direct Investment (FDI) refers to the practice where an individual or business invests directly in physical assets or enterprises in a foreign country with the intention of establishing a lasting interest and controlling the operations of those assets. This can include setting up a subsidiary, acquiring a company, or expanding existing operations outside one's home country.

The key aspect of FDI is the element of control; by directly investing in foreign markets, investors are not just providing capital but are also engaged in the management of their investment, guiding decision-making processes, and directing how value is created. This contrasts with other forms of investment that may not provide the same level of involvement or influence in foreign operations.

While investment in local businesses and government funding for international companies pertain to different contexts of investment, they do not capture the essence of FDI, which is characterized by direct control and management through capital infusion into foreign assets. Similarly, indirect investments do not involve the same level of engagement or oversight in the operations of the invested assets. Thus, the correct understanding of FDI centers around the direct connection and active management in foreign business ventures.