Economic Growth And Foreign Direct Investment

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Economic Growth and Foreign Direct Investment (FDI) Introduction: Economic growth and benefits of foreign direct investment depend on factors such as the industry and the learning curve. Foreign direct investment (FDI) is, “a controlling ownership in a business enterprise in one country by an entity based in another country.” [1] There are three strategic types of FDI: Horizontal FDI, Platform FDI, and Vertical FDI. The horizontal FDI is, “when a firms duplicates its home country-based activates at the same value chain in a host country through FDI. Platform FDI occurs when “foreign direct investment from a source country into a destination country for the purpose of exporting to a third country. Vertical FDI “takes place when a firm through FDI moves upstream or downstream in different value chains i.e., when firms perform value-adding activities stage by stage in a vertical fashion in a host country.”[1] It is a common belief that FDI increases local growth (economic development); and the benefits come from transfer for technology and management know-how, introduction of new processes, and employee training. [2] Analyzing various researches on the benefits of the FDI in different industry such as the manufacturing and service, it appears that the benefits vary significantly between the two. The main case for FDI (host country) is that it can positively affect the development of the host country because of the direct financing it supplies and the technology and management
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