| Foreign direct investment (FDI) is the movement of capital across national frontiers in a manner that grants the investor control over the acquired asset.
Thus it is distinct from portfolio investment which may cross borders, but does not offer such control. Firms which source FDI
are known as ‘multinational enterprises’ (MNEs). In this case control is defined as owning 10% or greater of the
ordinary shares of an incorporated firm, having 10% or more of the voting power for an unincorporated firm or development of a
greenfield branch plant that is a
permanent establishment of the originating firm.
In the years after the Second World War global FDI was dominated
by the United States, as much of the world recovered from the destruction
wrought by the conflict. The U.S. accounted for around three-quarters of new FDI (including reinvested profits) between 1945 and
1960. Since that time FDI has spread to become a truly global phenomenon, no longer the exclusive preserve of OECD countries. FDI has grown in importance in the global economy with FDI stocks now constituting
over 20% of global GDP.
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