As the world shrinks due to innovations and the globalized economy we see an increase in Foreign Direct Investment (FDI). This growing phenomenon is proving to create new markets and marketing channels. It is responsible for cheaper production facilities while providing access to products, financing, skills and new technologies that before were more difficult to obtain. The country which receives the investment acquires new sources of capital, organizational technologies and products which in turn push economic development. In its simplest terms FDI is when a company from a particular country invests in another (foreign) country by physically building up, or building its production processes in that other country. By directly funding equipment, machinery, or building factories FDI is a contrast to portfolio investing which is referred to more accurately as “indirect” investing. And as the world as experienced an increased rate of growth in the patterns of foreign investors, the meaning of FDI has expanded to include purchasing of management interests in industries and businesses in countries outside that of the investor’s country of origin. With this definition FDI includes one firm directly acquiring a foreign firm, building a new facility or investing in joint ventures with a local entity utilizing present technologies, and incorporating intellectual property licensing.
FDI has been instrumental in the last decade in the spread of business across national borders, internationalizing the very corporate structure and the laws under which they operate. The scope of the methods used with FDI have grown out of the natural reactions to the ever changing technology, changes in capital markets and the trend to free-up the national regulatory framework which dictates how one invests in business enterprises. In addition the rapid growth of information technologies along with the decrease in the costs of world-wide communications has simplified the management of foreign investments in comparison to times past. The factors which have proven to be the catalyst to the profound role FDI has taken across the globe include the liberalization of policies and tariffs, the deregulation of many industries along with privatization, and the easing on the part of many countries in allowing foreign investments and acquisitions.