Foreign direct investment is when:
A) a firm runs part of its operation abroad or invests in another company abroad.
B) investors buy foreign financial assets like stocks, bonds, or government securities.
C) investment is funded by foreign sources but operated domestically.
D) when a foreign government directly invests into a firm.

Question

Quizplus · Accepted Answer

Foreign direct investment refers to a firm establishing a physical presence, such as by opening a subsidiary, or investing in an existing company, in a foreign country. This is different from portfolio investment (option B), where investors buy financial assets in foreign markets but do not have direct control over the operations. Option C describes the situation of domestic investment funded by foreign sources, which is not considered foreign direct investment. Option D is not a common scenario, as foreign governments usually do not directly invest in firms but may provide incentives or regulations to attract foreign direct investment.

Foreign Direct Investment Is When