The Influence And Importance Of Foreign Direct Investment

1660 Words 7 Pages
Foreign Direct Investment The selection of Foreign Direct Investment (FDI) for a key term is tied into the importance and influence that FDI holds as it relates to the effects that it projects on foreign economies, culture and the political scenes. When financially well endowed organizations, enterprises, or even governments, invest in foreign markets, by either crafting supplier/buyer relationships with foreign enterprises, acquisitioning foreign enterprises, or basically establishing new production facilities to enter new foreign markets, there are underlying, and sometimes unintended consequences that the targeted nation (foreign market) will experience. Even dating back to the colonial times, before the birth of the US, mercantilism provided …show more content…
Other factors, such as the quality of the investments themselves, natural resources endowments and other important factors, have interdependent roles with the volume of FDI inflows to determine the potential of economic development. Lipsey (2000), UNCTAD (2006), Boudier (2008), and Narula and Guimón (2010), argues, as cited in Iacovoiu (2015), that the "quality of FDI received by a country is just as important as its quantity, because 'increased FDI does not necessarily imply a proportional increase in economic development. '" Also, "factors such as natural resource endowments, size and population, the degree of industrialization, the governmental polices applied, economic and political structure, and so forth (Iacovoiu, 2015)" all play in the role of determining economic growth and development for the country that is receiving investments. So, improvement in economic development, is the main reason why countries are engaging with FDI among foreign enterprises. This will explain how many governments will craft or reduce commercial legislation or attempt to stabilize a region rife with political turmoil to increase the attractiveness to foreign enterprises for the sole purposes of receiving capital from their …show more content…
With the increasing awareness of how human activity affects the environment, more eco-friendly business endeavors have come to fruition at the turn of the millennia; MNCs have engaged in the opportunity of addressing sustainability issues among the targeted economies it conducts their businesses in. This is due to the fact that the targeted economies, namely developing nations, prioritize the building of their infrastructure over the care-taking of their environment. Developing nations lack the necessary resources and infrastructure to make ecological sustainability a top priority; their more concerned of making their economy to be at least competitive with other foreign economies. The article, The Impact of Foreign Direct Investment on Sustainable Development, highlights this:
...if we take into account the fact that in some countries more than 40% of FDI goes to industry there is an impact on the level of greenhouse gas emissions. most of the time companies give priority to developing their business to the detriment of energy rationalization-as the latter reduces costs rather than generating turnover. (Voica, Panait & Haralambie,

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