Foreign direct investment
Broadly, foreign direct investment includes mergers and acquisitions, building new facilities, reinvesting profits earned from overseas operations, and intra company loans.
In a narrow sense, foreign direct investment refers just to building new facility, and a lasting management interest (10 percent or more of voting stock) in an enterprise operating in an economy other than that of the investor.
However, such a theory makes the assumption that there is perfect competition, there is no movement of labour across country borders,[5] and the multinational companies assumes risk neutral preferences.
[citation needed] Facing the challenges of his predecessors, Hymer focused his theory on filling the gaps regarding international investment.
In fact, foreign direct investment can be financed through loans obtained in the host country, payments in exchange for equity (patents, technology, machinery etc.
These are as follows: Hymer's importance in the field of international business and foreign direct investment stems from him being the first to theorize about the existence of multinational enterprises (MNE) and the reasons behind FDI beyond macroeconomic principles, his influence on later scholars and theories in international business, such as the OLI (ownership, location and internationalization) theory by John Dunning and Christos Pitelis which focuses more on transaction costs.
Moreover, "the efficiency-value creation component of FDI and MNE activity was further strengthened by two other major scholarly developments in the 1990s: the resource-based (RBV) and evolutionary theories"[7] In addition, some of his predictions later materialized, for example the power of supranational bodies such as IMF or the World Bank that increases inequalities (Dunning & Piletis, 2008).
[15]: 81 According to a study conducted by EY, France was in 2020 the largest foreign direct investment recipient in Europe, ahead of the UK and Germany.
[16] EY attributed this as a "direct result of President Macron's reforms of labor laws and corporate taxation, which were well received by domestic and international investors alike.
[17] European scale-ups that achieve significant growth are frequently acquired by foreign entities, with over 60% of these acquisitions involving buyers from outside the EU, predominantly from the United States.
[18][19] FDI in China, also known as RFDI (renminbi foreign direct investment), largely began in the late 1970s due to the reform and opening-up economic policies of paramount leader Deng Xiaoping.
[38] A 2008 study by the Federal Reserve Bank of San Francisco indicated that foreigners hold greater shares of their investment portfolios in the United States if their own countries have less developed financial markets, an effect whose magnitude decreases with income per capita.
Countries with fewer capital controls and greater trade with the United States also invest more in U.S. equity and bond markets.
[39] White House data reported in 2011 found that a total of 5.7 million workers were employed at facilities highly dependent on foreign direct investors.
[35] President Barack Obama said in 2012, "In a global economy, the United States faces increasing competition for the jobs and industries of the future.
Taking steps to ensure that we remain the destination of choice for investors around the world will help us win that competition and bring prosperity to our people.
"[35] In September 2013, the United States House of Representatives voted to pass the Global Investment in American Jobs Act of 2013 (H.R.
[44] Research shows that Cyprus, Germany, Netherlands, UK, and France have made an altogether investment in an amount 1.4 USD billion in the period 2007-2013.
As Chevillote Delgado[citation needed] mentions in his study, Latin America offers opportunities and is simultaneously within the expansion spectrum for some investors, as currently, Brazil holds an important position, as its growth over a period of 15 years[when?]
Digging deeper, this region of the world is not only the investment space for multinational companies in greater number due to its natural resources, but also because of the population settled here, as it is around 630,089,000 inhabitants.
