Foreign Direct Investment Glossary

A host economy's ability to recognize, assimilate, and apply new knowledge and technology from foreign investment.

The standard requiring that transfer prices between related entities of an MNC reflect prices that unrelated parties would charge in comparable transactions.

An agreement between two countries establishing terms and protections for cross-border private investment.

Purchasing or leasing existing production facilities in a foreign country to launch new production activities.

The section of the balance of payments recording cross-border investment flows, including FDI, portfolio investment, and other investments.

Acquiring or merging with an existing foreign company to gain control, transferring ownership rather than creating new assets.

FDI stimulating additional domestic investment through supply chain linkages and competitive dynamics.

The displacement of domestic firms by foreign competitors with superior resources and capabilities.

Government seizure of foreign-owned assets, either directly through nationalization or indirectly through regulatory measures.

A cross-border investment involving a lasting interest and significant control (typically 10%+ ownership) in a foreign enterprise.

The full range of activities that firms undertake to bring a product from conception to delivery, spread across multiple countries through FDI and trade.

Building entirely new operations, facilities, or plants in a foreign country from the ground up.

FDI where a firm duplicates its home-country activities in a foreign country to serve the local market.

Investor-State Dispute Settlement, a mechanism allowing foreign investors to bring arbitration claims against host governments.

A partnership between a foreign investor and a local firm to share ownership, risks, and profits in a business enterprise.

A company that operates in multiple countries through subsidiaries, branches, or affiliates and is the primary vehicle for FDI.

John Dunning's eclectic paradigm explaining FDI through Ownership, Location, and Internalization advantages.

The risk that political events, instability, or policy changes in a host country will adversely affect the value of a foreign investment.

The transfer of earnings from a foreign subsidiary back to the parent company's home country.

The competitive lowering of regulatory standards, taxes, and labor protections by countries seeking to attract FDI.

A designated area offering favorable regulations and incentives to attract foreign and domestic investment.

The unintended diffusion of knowledge, skills, and technology from foreign firms to the domestic economy.

The pricing of intra-firm transactions between related entities of a multinational corporation across borders.

The United Nations Conference on Trade and Development, which monitors global FDI trends and publishes the World Investment Report.

FDI where a firm locates different stages of production across countries to exploit cost advantages.