Foreign Direct Investment

Foreign Direct Investment

The reason I choose the topic; “Foreign Direct Investment” is that, despite in the face of ongoing business expansion and amelioration, there are many factors that border business in general which include; weak consumer confidence, tough austerity measures and economic uncertainty. However, in many countries, FDI is at increase level playing a crucial role for businesses across the globe to seek out opportunities for growth. In this juncture, I would like to learn how this international business activity is associated with industrial revolution and how it has paved its way in the massive international movement of business factors and acquire lasting interest in enterprises operating outside of the economy as a foreign direct investment.

As it is, international business activities are, in this present time, has become a thing to reckon with. Those in the ancient world deeply made a commitment which was highly dependent on international business. The economic activities, such as, foreign direct investment (FDI), joint ventures, strategic alliances and other forms of internationalization are commonly known for resource-seeking and were the most common motivation of FDI in this recent period. Even in the old times, many firms had already crossed the Atlantic, in both directions, in what can be described as market-seeking investment (Dunning, 1988)

The origins of modern international business activity are linked with the industrial revolution and most in particular, pedigreed in the massive international movement of factors that took place in the nineteenth century (Dunning, 1988). This explained that the resource-seeking was the most common motivation of FDI in this period. In the nineteenth century until a certain time, irrespective of the presence of FDI, majority of foreign investments were based on portfolio capital. Due to the way it was then, a large number of international business activities were neglected in the term of economic theory. The perception of these activities could not have any impact in terms of economy until the late 1950s (Jones, 1984). More importantly, it was mentioned that based on the neo-classical theory, the perfect markets and the international immobility of factors, did not easily incorporate multinational activity.

The article on United Nations Conference on Trade and Development explained that the investment made to acquire lasting interest in enterprises operating outside of the economy of the investor, the purpose of that investment is to gain an effective voice in the management of the enterprise and to take a lasting interest of a direct investment in an enterprise with the capital that is provided by the direct investor, either directly or through other enterprises. It also mentioned that this form of investment by the direct investor classified as FDI is equity capital which the reinvestment of earnings through it and the provision of long-term and short-term intra-company loans between parent and affiliate enterprises can have a capital flow through their businesses. As already explained, most types of investment involved by the investor directly, such investments are FDI as classified and are equity capital.

The article also described direct investment enterprise as