2. Long term investment by a foreign direct investor in
an enterprise resident in an economy other than that
in which the foreign direct investor is based
The FDI relationship, consists of a parent enterprise
and a foreign affiliate which together form a
transnational corporation
Parent enterprise investment must afford the parent
enterprise control over its foreign affiliate
3. Direct investment in new Primary type of FDI
facilities/ expansion of involving transfer of existing
existing facilities assets from local firms to
foreign firms
Objective to create new
Assets and operation of
production capacity and
firms from different
jobs, transfer technology
countries are combined to
and know-how and form
establish a new legal entity
linkages to the global
(Cross-border merger)
marketplace
Greenfield Investment Mergers & Acquisitions
4. Inflow of equipment & technology Crowding of local industry
Competitive advantage & innovation Loss of control
Financial resources for expansion Repatriation of profits/dividends
by investor
Employment generation
Conflicts of codes/laws
Contribution to exports growth
Possible exploitation of
Access to global marketplace for
resources- material/ wages
domestic players
Effect on local culture/sentiments
Access to low cost resources for
–socio cultural effect
investor
Effect on natural environment
Access to new market / distribution
channel
Improved consumer welfare
Advantages Disadvantages
5. Attracting long-term foreign capital to supplement
domestic investment efforts, particularly in
infrastructure and export competitive sectors
Creating skilled employment opportunities and
import of world class managerial practices
Developing attractive configurations of local
advantages at global level
Promoting technology and other linkages to enhance
domestic industry competitiveness
