3.Define foreign direct investment (FDI). Discuss and evaluate five Essay

3.Define foreign direct investment (FDI). Discuss and evaluate five different effects (positive and negative) that FDI can have on array clownish economies - Essay ExampleThis assignment will cover the definition and effects of foreign direct investment on the legions clownishs economy.Foreign direct investment refers to a form of investment, where a company from one country decides to make a physical investment in other country by putting up an industrial unit in another country. The direct investment in machinery, buildings and equipment contrasts a portfolio investment that is considered as reservation an indirect investment (Gregory 1997, p. 33). Currently, with the rapid growth and transformations in global investment patterns, the definition has widened to include the acquirement of a lasting management interest in an entity outside the investing companys home country. Going by this definition, therefore, Foreign Direct Investment may take various forms such as direct acq uisition of a foreign entity, building of a facility, or investing in a joint venture with a local firm.virtuoso of the principal effects of the foreign direct investment is diffusion of technology. A foreign direct investment encourages the entity seeking investment in the foreign country to use different technologies in the production process (Razin 2008, p. 64). The firm uses its own technology in buildings and the way of doing business. In so doing, people in the host country acquire new technologies and skills from the foreign entity, which they apply in the production process. Use of the acquired skills and technology in the production process assist the host country increase its productivity. Through the increment in production, the Gross Domestic Product (GDP) of the host country is change magnitude considerably, which promotes economic growth (Moran 2005, p. 64).FDI provides the host country with increased physical stock. The increase in the physical stock increases the pr oductivity rate of the host country. This adds up to the countrys income. In addition, the FDI provides the host country with monetary resource for investment, which adds up to