Foreign Direct Investment

A form of FDI where a parent company builds its operations in a foreign country from the ground up, including new production facilities, offices, and distribution hubs. This creates entirely new productive capacity in the host economy.

A form of FDI in which a foreign investor purchases an existing company or merges with it to gain control. Unlike greenfield investment, cross-border M&A transfers ownership of existing assets rather than creating new ones.

A theory by John Dunning that explains why firms engage in FDI through three advantages: Ownership advantages (proprietary technology, brand), Location advantages (market access, resources), and Internalization advantages (keeping operations in-house rather than licensing).

An agreement between two countries that establishes the terms and conditions for private investment by nationals and companies of one country in the other, providing protections such as fair treatment, protection from expropriation, and access to international arbitration.

A geographically delimited area within a country that offers more favorable economic regulations, such as tax incentives, reduced tariffs, and streamlined customs procedures, to attract foreign and domestic investment.

The pricing of goods, services, and intangible assets transferred between related entities within a multinational corporation across borders. It can be used strategically to shift profits to low-tax jurisdictions, raising regulatory concerns.

The process by which a multinational corporation transfers profits earned in a foreign host country back to its home country. High levels of profit repatriation can reduce the net benefit of FDI to the host economy.

Crowding out occurs when FDI displaces domestic firms that cannot compete with the superior resources of foreign entrants. Crowding in occurs when FDI stimulates additional domestic investment through supply chain linkages, technology spillovers, and enhanced competition.

The unintended transfer of knowledge, skills, and technology from foreign-invested firms to domestic firms and workers in the host country, occurring through labor mobility, supply chain relationships, and demonstration effects.

A mechanism in international investment agreements that allows foreign investors to bring arbitration claims directly against a host government if the investor believes the government has violated its treaty obligations, such as through expropriation or discriminatory treatment.