International Business: The New Realities, 5th Edition

Characteristics of Foreign Direct Investment

1. 14.2 Describe the characteristics of foreign direct investment.

FDI is an advanced form of foreign market entry with distinctive characteristics. Key features of FDI include:

• Substantial resource commitment. As the ultimate internationalization strategy, it is far more taxing on the firm’s resources and capabilities than any other entry strategy. For example, the U.S. firm General Electric owns more than $300 billion in factories, subsidiaries, and other operations outside the United States.11

• Local presence and operations. With FDI, the firm establishes itself directly in the market, leading to direct contact with customers, intermediaries, facilitators, and governments. Some firms concentrate ...