- It is an investment made by a company or entity based in one country, into a company or entity based in another country. FDI differs substantially from indirect investments such as portfolio flows, wherein overseas institutions invest in equities listed on a nation’s stock exchange as entities making direct investments typically have a significant degree of influence and control over the company into which the investment is made.
- Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
- The investing company may make its overseas investment by setting up a subsidiary or associate company in the foreign country, by acquiring shares of an overseas company, or through a merger or joint venture.