Which type of FDI involves moving into different stages of the value chain?

Which type of FDI involves moving into different stages of the value chain?

• A. Horizontal FDI
• B. Vertical FDI
• C. Equity FDI
• D. Portfolio FDI

Answer: (B)

Vertical FDI entails a company investing in different stages of the value chain, which refers to the various steps involved in producing and delivering goods and services. By engaging in vertical FDI, a business may establish operations in either upstream activities (such as raw material extraction or component manufacturing) or downstream activities (like distribution or retail). This strategy allows companies to gain control over their supply chain, improve efficiencies, reduce costs, and enhance their competitive advantage. The focus on different stages of the value chain distinguishes vertical FDI from other types, such as horizontal FDI, where a company expands its operations at the same level of the value chain in different geographic markets. While equity FDI and portfolio FDI also involve investment in foreign markets, they do not specifically refer to moving through the stages of the value chain. Equity FDI relates to acquiring a significant stake in foreign businesses, while portfolio FDI deals with investments in financial assets of other countries.

Vertical FDI entails a company investing in different stages of the value chain, which refers to the various steps involved in producing and delivering goods and services. By engaging in vertical FDI, a business may establish operations in either upstream activities (such as raw material extraction or component manufacturing) or downstream activities (like distribution or retail). This strategy allows companies to gain control over their supply chain, improve efficiencies, reduce costs, and enhance their competitive advantage.

The focus on different stages of the value chain distinguishes vertical FDI from other types, such as horizontal FDI, where a company expands its operations at the same level of the value chain in different geographic markets. While equity FDI and portfolio FDI also involve investment in foreign markets, they do not specifically refer to moving through the stages of the value chain. Equity FDI relates to acquiring a significant stake in foreign businesses, while portfolio FDI deals with investments in financial assets of other countries.