How Does Government
Influence FDI?
Governments can encourage outward FDI
government-backed insurance programs to cover major
types of foreign investment risk
Governments can restrict outward FDI
limit capital outflows, manipulate tax rules, or outright
prohibit FDI
Governments can encourage inward FDI
offer incentives to foreign firms to invest in their countries
gain from the resource-transfer and employment effects of
FDI, and capture FDI away from other potential host countries
Governments can restrict inward FDI
use ownership restraints and performance requirements