Foreign Direct Investment

Running Head: Foreign Direct Investment
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Foreign Direct Investment
Report
Student Name
3/14/2019

Foreign Direct Investment
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Executive Summary
Trade is always an important part of economy and after globalization it reaches to the
international level. Due to international trade the role of foreign direct investment has been
increasing in development of the economy. Foreign Direct Investment simply is an investment
made by a company in other country business for higher return on investment for long run.
There are many modes of doing FDI that include by setting up of subsidiary in foreign country,
acquiring stake in company outside the home country and majorly through mergers and
acquisitions. This report consists of concept and theories of foreign direct investment and the
cost benefit analysis of FDI in relation to host country and home country. The trend analysis of
the United States will be explained in this study with relate to overall investment in the world.

Foreign Direct Investment
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Table of Contents
Executive Summary.....................................................................................................................................1
Introduction.................................................................................................................................................3
Theories of FDI............................................................................................................................................4
Cost and Benefits Analysis...........................................................................................................................5
Trend Analysis: US.......................................................................................................................................7
Conclusion...................................................................................................................................................9
References.................................................................................................................................................10
Appendix...................................................................................................................................................12

Foreign Direct Investment
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Introduction
When resident of one country invest in others countries to acquire the ownership of assets is
considered as Foreign Direct Investment. The economic growth of developing nations depends
on or connected with the inflow of FDI in countries. In this era of globalization, constant inflow
of FDI is proving to be an effective way for faster growth of developing countries and also
playing an important role in steady development of the nations (Wren & Jones, 2012).
The role of FDI in economic development is vast because it provides financial resources,
technology advancement, infrastructure and innovative management techniques in a country
where investment is done or it refers to the participation of one country in another country by
the way of joint venture and expertise. There are two kinds of FDI; outward and inward foreign
investment or difference of both is net FDI inflow in a country. When accompany receive more
investment from other countries in a particular year it is called inward FDI and when more of
the investment is done in other nation by a country then it is called outward foreign direct
investment. Net inflow of FDI includes surplus of inward investment over outward investment
(Paulo & Bento, 2009).
Globally, FDI fell by 23 percent, from $1.87 trillion in 2016 to $1.43 trillion in 2017, which shows
a higher decline due to some macroeconomic variables that include decrease in GDP,
international trade, decrease in value of mergers and acquisitions and other Greenfield projects
(Bank, 2018). The flow of FDI in developing countries was found to be stable but in developed
countries FDI fell sharply (Figure 1). During 2017, total share of developing countries in global
FDI inflows was 47 percent compare to 36 percent in 206, an increase of approximately 10
percent in the overall share (UNCTAD, 2018).
Year Growth of Foreign Direct Investment, net inflows (% of GDP) Last 10 years
2007 5.272
2008 3.761
2009 2.173
2010 2.742
2011 3.025
2012 2.720
2013 2.573
2014 2.278
2015 3.146
2016 3.159
2017 2.349