Which of the following are foreign direct investments (FDI), and which are not?

Which of the following are foreign direct investments (FDI), and which are not?

Which of the following are foreign direct investments (FDI), and which are not? Explain your answer to each.

1. A German businessman buys $10 million of Toshiba stock on the Tokyo Stock Exchange.
2. A French businessman buys an apartment building in Rome, Italy.
3. A German company merges with a British company; stockholders in the British company exchange their stock for shares in the German firm.
4. A Korean firm builds a plant in Brazil and manages the plant as a contractor to the Brazilian government.

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Which of the following are foreign direct investments (FDI), and which are not? Explain your answer to each.

A German businessman buys $10 million of Toshiba stock on the Tokyo Stock Exchange.

An investment that involves the purchase of equities of a foreign based company is not a foreign direct investment (Balasubramanyam, Salisu, & Sapsford, 1996). Rather, the German businessman is involved in what we call a portfolio investment in Japan.

A French businessman buys an apartment building in Rome, Italy.

The acquisition of an apartment building means that there will be a rental business running.

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