Foreign Direct Investment and Government FDI Interventions

Foreign Direct Investment and Government FDI Interventions
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Foreign Direct Investment and Government FDI Interventions
Foreign direct investment (FDI) entails buying a significant stock of a firm or physical assets in another nation to gain the management control measure (Wild & Wild, 2016, Textbook). In other words, it involves starting projects or having stake ownership by investors in other countries. Nations with stable economies and political climates are the ones likely to attract FDI. Countries, such as the United States of America (USA) and China try their best to attract more foreign investors since it means channeling a significant amount of money in their economies and creating more employment for their citizens. The paper focuses on how the article “US Cities Fight to Attract Foreign Investors’ Money” by Peter Spiegel and Amanda Chu supports the international product life cycle theory.
Government policies significantly influence FDI. The USA has been highly recognized for attracting foreign investors in the past and even today. Regardless of the political dysfunction and Great Recession, many corporations from different parts of the globe invest in the USA’s economy. For example, in 2015, the FDI influx to the country amounted to $468 billion (Chu & Spiegel, 2022, Financial Times). However, the USA was almost caught up by China in 2020 during the Covid-19 pandemic. China’s economy has been rapidly growing, posing significant competition to the USA’s economy. In that light, the USA sat back to rethink the most effective strategies to attract more foreign investors than its primary competitor, China. Many cities in the USA have made it favorable for foreign investors, including Miami, Greensboro, Philadelphia, Raleigh, North Carolina, Charlotte, Chicago, Kansas, Austin, Pittsburgh, and Jacksonville (Chu & Spiegel, 2022, Financial Times). As such, the more a country attracts foreign investors, it increases the likelihood of growing and expanding its economy overseas among other benefits.
Numerous factors contribute to corporations’ decisions on the best country or location to invest in or start projects. For instance, the USA has been the most preferred country before the Covid-19 pandemic since it has the largest economy in the world and political stability. However, the coronavirus outbreak shut down many aspects of the country’s economy. Some companies in the USA closed their operations indefinitely, and people lost their livelihoods. The healthcare sector was overwhelmed due to the rapidly increasing number of infections. On that note, some foreign investors set their eyes on China, which despite the Covid-19 pandemic showed its ability to combat the spread of the virus. Other factors that influence the choice of foreign investors when selecting the country to invest in include cheap labor, availability of infrastructures, such as airports, roads, and ports, openness to expatriates, incentive packages, tax breaks, institutions of higher education, and aftercare, such as visa processing (Chu & Spiegel, 2022, Financial Times). All in all, many foreign investors ensure that there is high demand for the products and services of the companies or projects they want to channel funds to in other countries.
Chu and Spiegel’s article supports the eclectic theory as presented in the textbook, International Business: The Challenges of Globalization by John Wild and Kenneth Wild. In particular, the eclectic theory postulates that companies consider...