What is foreign direct investment?

Foreign direct investment (FDI) refers to the acquisition of assets in a foreign country with the intention of directly managing those assets. This can include establishing or expanding operations in another country, such as building factories, acquiring businesses, or setting up joint ventures. The key aspect of FDI is the investor's desire for a significant degree of control over the foreign operations, which distinguishes it from other forms of investment, like portfolio investment, where the investor does not have control over the assets.

The correct choice emphasizes the direct management and active involvement in the foreign assets, reflecting a long-term commitment to the foreign economy. This is pivotal for understanding how multinational corporations operate and seek to benefit from international markets. The nature of FDI typically leads to technology transfer, job creation, and economic development in the host country, making it a crucial element of global economic interactions.