The entry of multinational companies in emerging markets has created a surge in economic activity and has redefined globalization. Multinationals are no longer considered marginal to an emerging market’s economy, instead they are seen as a source of market competition and industrial growth. Open economies with skilled workforces and good growth prospects tend to attract larger amounts of foreign direct investment than closed, highly regulated economies.
What is foreign direct investment? Foreign direct investment (FDI) is an investment made by a company in a country other than that in which is it based, and are investments in the country’s domestic goods and services. This does not include foreign investments in the domestic stock market. Equity investments are more volatile and have a tendency to flow out of an economy at the first sign of trouble; conversely FDIs are invariably expected to be a relatively stable longer-term commitment on behalf of a multinational company.