Foreign Direct Investment (FDI)
An investment by a company or individual in one country that establishes a lasting business interest in another country.
What is FDI?
Foreign Direct Investment (FDI) occurs when an investor or company in one country establishes a lasting controlling interest (generally 10% or more ownership) in a business enterprise in another country. It differs from portfolio investment (buying stocks or bonds without control) in that FDI involves a meaningful management influence. FDI takes three main forms: greenfield investment (building new facilities from scratch), mergers and acquisitions of existing foreign companies, and joint ventures. FDI is considered a major driver of economic development in recipient countries, transferring capital, technology, and managerial know-how. The US has historically been both the world's largest source and recipient of FDI.
Example
Toyota's manufacturing plants in the US (Georgetown, Kentucky and San Antonio, Texas) are examples of Japanese FDI in the United States. Toyota has invested over $12 billion in US manufacturing, employing over 40,000 people directly. This greenfield FDI created local jobs, transferred Japanese manufacturing technology, and integrates Toyota into the US supply chain.
Source: Bureau of Economic Analysis — Foreign Direct Investment