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Foreign Direct Investment

In: Introduction to International Business Transactions

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Abstract

This chapter explains the process of forming, financing, and operating a new foreign company. Foreign direct investment is a complex and risky venture, requiring analysis in diverse fields of law. This chapter focuses on the considerations unique to forming and operating a foreign investment. It begins by explaining the attraction of foreign investment to a business firm, describing the various forms that foreign investment may take, and discusses the advantages and disadvantages of each. It then summarizes the U.S. regulatory regime for registering and reporting foreign investments, and the national security review process known as Exon-Florio review. It then discusses a common requirement for foreign investment transactions, known as premerger notification and review. The chapter then describes in general terms some of the legal regimes that are likely to regulate foreign investment, such as labor and employment law and corporate immigration regulation. It describes international efforts to impose corporate social responsibility on multinational enterprises and the international guidelines that have resulted. It then discusses the legal issues relating to financing of foreign investments, including U.S. and international agencies that frequently assist business firms with cross-border credit, working capital loans, and major project finance. It discusses the intricacies of project finance as they relate to legal arrangements to regulate risk and allocate control over major foreign investment projects. Finally, it introduces the special risks involved in foreign investment and the role of insurance provided by international agencies and national government agencies. It concludes with practice essays and multiple choice questions.

Suggested Citation

  • ., 2020. "Foreign Direct Investment," Chapters, in: Introduction to International Business Transactions, chapter 7, pages 507-600, Edward Elgar Publishing.
    • Handle: RePEc:elg:eechap:19782_7
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    Citations

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    Cited by:

    1. Ofori, Isaac K. & Asongu, Simplice A., 2022. "Repackaging FDI for Inclusive Growth: Nullifying Effects and Policy Relevant Thresholds of Governance," MPRA Paper 111359, University Library of Munich, Germany.
    2. Sheilla Nyasha & Nicholas M. Odhiambo & Simplice A. Asongu, 2021. "The Impact of Tourism Development on Economic Growth in Sub-Saharan Africa," The European Journal of Development Research, Palgrave Macmillan;European Association of Development Research and Training Institutes (EADI), vol. 33(6), pages 1514-1535, December.
    3. Friday Osemenshan Anetor & Olusegun Vincent, . "Do human capital and institutional environment constrain the impact of foreign direct investment inflows on economic growth in Africa?," UNCTAD Transnational Corporations Journal, United Nations Conference on Trade and Development.
    4. Ofori, Isaac K. & Asonngu, Simplice A., 2021. "Foreign Direct Investment, Governance and Inclusive Growth in Sub-Saharan Africa," MPRA Paper 108178, University Library of Munich, Germany.
    5. Kossi AYENAGBO, 2021. "The Role of Financial Globalization through FDI in Driving Inequality in the Sub-Saharan Region," Applied Economics and Finance, Redfame publishing, vol. 8(5), pages 10-17, September.
    6. Ofori, Isaac K. & Dossou, Marcel A.M. & Asongu, Simplice A. & Armah, Mark K., 2023. "Bridging Africa’s income inequality gap: How relevant is China’s outward FDI to Africa?," Economic Systems, Elsevier, vol. 47(1).
    7. Roxana Wright, 2022. "Subsidiary Activities: Parent Company and Local Predictors of Business Resilience ," GATR Journals jber226, Global Academy of Training and Research (GATR) Enterprise.
    8. Nevi Danila, 2023. "The Asymme The Asymmetric Ex Tric Exchange Ra Ange Rate Pass-Through T Ass-Through To Inflation In The Selected Asean Countries," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(1), pages 125-144, March.
    9. Majed Alharthi, 2022. "Factors of foreign direct investment inwards: The case of Saudi Arabia," Proceedings of Economics and Finance Conferences 13015491, International Institute of Social and Economic Sciences.
    10. Rasheed Abolaji FOLARIN, 2021. "Foreign Direct Investment and Nigeria Economy Growth," REVISTA DE MANAGEMENT COMPARAT INTERNATIONAL/REVIEW OF INTERNATIONAL COMPARATIVE MANAGEMENT, Faculty of Management, Academy of Economic Studies, Bucharest, Romania, vol. 22(4), pages 608-615, October.
    11. Thai Hung, Ngo & Nguyen, Linh Thi My & Vinh Vo, Xuan, 2022. "Exchange rate volatility connectedness during Covid-19 outbreak: DECO-GARCH and Transfer Entropy approaches," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 81(C).
    12. Faaza Fakhrunnas & Rindang Nuri Isnaini Nugrohowati & Razali Haron & MB Hendrie Anto, 2023. "The Asymmetric Relationship Between Macroeconomic Determinants And Nonperforming Loans: Evidence From The Banking Industry Of Indonesia," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 26(1), pages 145-174, March.
    13. Isaac K. Ofori & Toyo A. M. Dossou & Simplice A. Asongu & Mark K. Armah, 2021. "Bridging Africa’s Income Inequality Gap: How Relevant Is China’s Outward FDI to Africa?," Working Papers of the African Governance and Development Institute. 21/098, African Governance and Development Institute..
    14. Xiaoqing Ai & Keyu Guo & Hongda Zhang, 2023. "Can Digital Financial Inclusion Affect Green Development? An Empirical Analysis Based on China's Provinces," Advances in Management and Applied Economics, SCIENPRESS Ltd, vol. 13(3), pages 1-6.
    15. Kattirtzi, Michael & Ketsopoulou, Ioanna & Watson, Jim, 2021. "Incumbents in transition? The role of the ‘Big Six’ energy companies in the UK," Energy Policy, Elsevier, vol. 148(PA).

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