Question
Foreign direct investment is the term used to describe purchases of firms in another country that involve
(A) internationally traded goods across countries
(B) using another currency
© taking a management responsibility
(D) the exchange rate market
(A) internationally traded goods across countries
(B) using another currency
© taking a management responsibility
(D) the exchange rate market
Ask by Martin Turnbull. in the United States
Mar 23,2025
Upstudy AI Solution
Tutor-Verified Answer
Answer
Foreign direct investment involves taking management responsibility in a business in another country.
Solution
- Foreign direct investment (FDI) involves acquiring a lasting interest in a business operating in a country other than the investor’s home country.
- A key feature of FDI is that the investor obtains a significant degree of influence over the management of the acquired firm.
- This aspect distinguishes FDI from portfolio investment, where investors typically purchase securities without actively managing the firm.
Therefore, FDI is primarily about
The correct answer is ©.
Answered by UpStudy AI and reviewed by a Professional Tutor
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Simplify this solution Extra Insights
Foreign direct investment (FDI) often involves acquiring a substantial degree of influence over the foreign firm, generally defined as owning at least 10% of the company’s shares. This helps to forge strong business ties and enables the investing company to participate in the management and operations of the foreign business, resulting in a direct and lasting impact on the foreign economy.
In any FDI scenario, understanding the local market conditions, regulations, and cultural nuances is crucial. Many investors underestimate the importance of these factors and may face obstacles due to miscommunication or misaligned expectations. It’s vital to conduct thorough research and possibly engage local experts to navigate the complexities of foreign investment successfully!
