Question

Which of the following is an example of direct foreign investment for a U.S.-based MNC? a....

Which of the following is an example of direct foreign investment for a U.S.-based MNC?

a. licensing arrangements that will allow a foreign country to use the MNC's technology
b. exporting to a country
c. purchasing existing companies in a country
d. investing directly (without brokers) in foreign stocks
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Answer #1

Foreign direct investment occurs when a foreign country buys land or space for its operations in a foreign country. With this understanding we can analyse the options:


a. licensing arrangementsallowing a foreign company to use the MNC technology is a form of indirect investment.
b. Exporting is not an investment but more of an expansion of sales in a new market   
c. purchasing existing companies in a country involves owning land and building in the other country and therefore falls in the category of foreign direct investment.     
d. investing in foreign stocks is a foreign portfolio investment rather direct investment

So the correct option is c

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