Investopedia defines foreign direct investment (FDI) as any investment that a company or entity based in one country makes into a company or entity based in another country. FDIs differ significantly from indirect foreign investments, such as portfolio flows, which involve the purchase of equities that are listed on a nation's stock exchange.
Investors who choose the FDI approach are often able to exert a substantial amount of influence upon and control over the companies into which they invest. They can also receive a range of lucrative tax incentives.
From the point of view of the company that receives direct overseas investment, the FDI approach carries with it a number of possible benefits including increased productivity and easier transfer of foreign goods and resources. In general, FDI can stimulate economic development and increase employment rates in the country of the company targeted for investment.