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Definition: Foreign direct investment

Foreign direct investment

Foreign direct investment is the category of international investment in which an enterprise resident in one country (the direct investor) acquires an interest of at least 10 % in an enterprise resident in another country (the direct investment enterprise). Subsequent transactions between affiliated enterprises are also direct investment transactions.

As it gives the investor an effective voice in the management of the enterprise and a substantial interest in its business, FDI implies a long-term relationship between the direct investor and the direct investment enterprise.

Investment may take place through the establishment of an entirely new firm, so-called "Greenfield" investment, or through the complete or partial purchase of an existing firm via a merger or an acquisition (page 24).

Foreign direct investment (FDI) is cross-border investment made by a direct investor with the intent of obtaining a lasting interest in an enterprise resident in another country (direct investment enterprise).
International investment is classed as FDI when an investor owns 10% or more of ordinary shares or voting rights in an incorporated or unincorporated enterprise abroad respectively (page 145).
Eurostat, "European Union foreign direct investment yearbook 2007 - Data 2001 - 2005", Office for Official Publications of the European Communities, Luxembourg, 2007