ABSTRACT
Foreign direct investment (FDI) is the process whereby a firm in one country provides capital to an existing or newly-created firm in another country. Over recent decades FDI has increased spectacularly, so that world flows have increased from an estimated $13 billion in 1970 to nearly $1,500 billion by the year 2000. While FDI has fallen-back recently, there is no doubt about the central role played by FDI in ‘globalisation’ and its importance to modern economic activity. Indeed, the channel for FDI is the multinational enterprise (MNE), and it is believed that there are 60,000 MNEs in the world economy, with production occurring in nearly one million foreign affiliates. Much of this is associated with the developed world, which accounts for over 90 per cent of FDI outflows – and most of the inflows – so that over 80 of the top 100 MNEs have headquarters in either the United States or the European Union. It is perhaps surprising that FDI is a modern phenomenon, as it is generally accepted that the appearance of the modern MNE, with control over foreign production units, did not occur until the Nineteenth Century. However, it was not until the latter half of the Twentieth Century that world FDI flows began to increase substantially, and when academics and policymakers became interested.
