|
Foreign direct investment (FDI) is the most advanced way to enter to foreign markets. In the economic literature there are different definitions of foreign direct investments. For example P. Krugman and M. Obstfeld define FDI as an international transfer of capital to establish a branch in another country and control it. Definition emphasize that foreign by direct investment we should understand investments made in a country other than the country of origin of the investor, consisting of locating capital (usually long term) by a foreign company in order to obtain effective control of the company management and the achievement of the gains. According to the definition we can try to define the what is Foreign direct investment. It includes: • the purchase of existing shares in foreign companies • establishment of new subsidiaries abroad, • the creation of a joint venture with a foreign entity, • the acquisition of immovable property abroad in order to expand their activities. The literature distinguishes two basic forms of Foreign direct investment: • greenfield investments (independent building companies from the beggining), • brownfield investment (acquisition of existing companies and the restructuring or collaboration with a local partner in a joint venture). investor Foreign direct investment in the form of greenfield is characteristic for developing countries and rely on the fact that the foreign investor is building a factory in the host country from scratch. While Foreign direct investment in the form of mergers and acquisitions (brownfield investments) dominate in developed countries and usually followed by the acquisition of a controlling package of assets in one entity or joint decision to merge the two entities from different countries. In conclusion it should be noted that foreign direct investment is considered as one of the most profitable and safe forms of international capital flows and the financing of restructuring and development, mainly because it provide both: direct access to foreign markets, as well as the modern techniques and technology in the production and management.
Related Articles -
FDI Strategy, Foreign Direct Investment Strategy, Nation Brand, Impact of Foreign Direct Investment, City Branding,
| 
