Foreign Investment and Internation Investment theory in plain english so I can understand it.
Here are a bunch or relevant sites.
http://www.google.com/search?hl=en&ie=UTF-8&sa=X&oi=spell&resnum=0&ct=result&cd=1&q=International+Investment+theory&spell=1
Foreign investment and international investment theory can sound complex, but I'll try to explain in plain English.
Foreign investment refers to the investment made by individuals, companies, or governments of one country in businesses or assets located in another country. For example, if a company based in the United States decides to open a factory in China, that would be considered foreign investment.
International investment theory, on the other hand, tries to understand and explain the reasons behind these foreign investments. There are several theories that economists use to analyze international investment:
1. Comparative Advantage: This theory suggests that countries invest in foreign markets to take advantage of the differences in costs and resources between countries. By investing in countries where resources are more available or cheaper, companies can produce goods more efficiently and at a lower cost.
2. Product Life Cycle: According to this theory, companies invest in foreign countries to expand their market for products that have reached the later stages of their life cycle. For example, a company may invest in a developing country where there is a growing demand for its mature product.
3. Market Imperfections: This theory acknowledges that markets are not always perfect, and there may be barriers or limitations that hinder trade between countries. Foreign investment can be seen as a way to overcome these barriers and access new markets.
4. Internalization: This theory suggests that companies invest in foreign countries to protect their intellectual property or strategic assets. By having a physical presence in another country, companies can better control and manage their operations, as well as gain access to local knowledge and resources.
Understanding these theories can help economists and policymakers make sense of the patterns and motivations behind foreign investment. It can also inform decision-making at the individual and company level when considering international investment opportunities.