Question
Which statement best captures the difference between FDI and FPI ?
The correct answer is
FDI is investment with lasting interest and managerial control; FPI is passive investment without control.
FDI vs. FPI: Key Distinctions
The fundamental difference between Foreign Direct Investment (FDI) and Foreign Portfolio Investment (FPI) hinges on the investor's objective and degree of influence over the foreign enterprise.
Understanding FDI
- Objective: To gain a lasting interest and exert significant influence or control.
- Characteristics: Implies active management participation and a long-term commitment to the business operations in the host country.
Understanding FPI
- Objective: Primarily focused on portfolio diversification and potential short-term financial gains.
- Characteristics: Characterized as a passive investment, lacking substantial influence or managerial control over the enterprise. Investors typically buy securities like stocks and bonds.
The core distinction lies in control and intent. FDI seeks control and lasting interest, while FPI represents passive investment without control.
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Important Questions from Business Environment and International Business
G20 Summit (2023) Proposed which Economic corridor including shipping and rail lines?
- According to eclectic theory of foreign direct investment, foreign direct investment will occur under which of the following conditions when they are to be uniquely combined?
A. Ownership
B. Location
C. Market power
D. Internationalization
E. Vertical integration
Choose the most appropriate answer from the options given below : - Match List - I with List - II.Choose the correct answer from the options given below:
List - I List - II A. Greenfield Investment I. Direct Investment overseas aimed to sell the output of a firm's domestic production process B. Foreign Portfolio Investment II. Overseas investment to acquire existing facilities C. Forward Vertical FDI III. Overseas investment to create new facilities from the ground up D. Brownfield Investment IV. Investment in foreign financial instruments such as foreign stock, government bonds etc. - A possible cost of FDI to the host country is:
- A statistical statement in International business that shows at a point the value of financial assets of residents of an economy that are claims on non-residents or are gold bullion held as reserve assets and the liabilities of residents of an economy to non-residents is known as
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