Foreign Direct Investment and the Operations of Multinational Firms: Concepts, History, and Data
58 Pages Posted: 14 Dec 2001 Last revised: 25 Oct 2010
Date Written: December 2001
The concept and measurement of foreign direct investment have changed over time, and what is measured by balance of payments flows and stocks is quite different from what is implied by theories of direct investment. The industrial distribution of stocks of FDI, the most widely available measure, is only poorly related to the distribution of FDI production, and changes in stocks are poorly related to changes in production. FDI flows have grown in importance relative to other forms of international capital flows, and the resulting production has increased as a share of world output, but it was still only about 8 per cent at the end of the 20th Century. The United States began its role as a foreign direct investor in the late 19th Century, while it was still a net importer of capital. It became the dominant supplier of direct investment to the rest of the world, accounting for about half of the world's stock in 1960. Since then, other countries have become major direct investors. The U.S. share is now less than a quarter of the world total and the United States has become a major recipient of FDI from other countries.
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