The Theories Behind Foreign Direct Investment Finance Essay
The findings indicated that six theories can be associated with the factors influencing the choice of FDI locations, namely capital. Among many investments, foreign direct investment has a crucial impact on a country's economic growth, as a prerequisite for attracting foreign direct investment. Foreign direct investment is defined as an investment made to acquire a lasting interest in enterprises operating outside the investor's economy. The first explains FDI as a response to different exchange rate variables. The second applies portfolio theory to international diversification because foreign direct investment acquired an important role in the international economy after the Second World War. Theoretical studies of FDI have led to theories of FDI being assessed from a variety of theoretical lenses, and any attempt to organize them requires a determination of which. Research has sought to understand how foreign direct investment affects host economies. This article reviews the empirical literature and specifically addresses the question: How do foreign direct investments affect the economic development of host countries and what is the role of local financial markets in mediating the potential benefits? We first define FDI and Purpose - The purpose of this article explains how The framework for the motives of FDI needs to be reexamined when analyzing multinational enterprises in emerging markets. Yeaple and Nocke 2005 developed the allocation theory to analyze foreign direct investment. In this theory, companies have two choices. One choice is to build a new factory in a foreign market, while the other is concerned with cross-border acquisitions. One or both actions can be taken simultaneously. The process of economic development has become much more complex, and perhaps this precedes a more comprehensive set of theories to fully explain the complicated dynamic relationship between public investment, private investment and foreign direct investment, which, although they interact, is believed to these theories, together with other country-specific macroeconomic characteristics, reveal the following: these theories argue that foreign direct investment directly influences the trade in which growth occurs20 and increases local capital, which improves the productivity of local investments..