The New Palgrave Dictionary of Economics

2018 Edition
| Editors: Macmillan Publishers Ltd

Foreign Investment

  • Herbert G. Grubel
Reference work entry


Defined narrowly, foreign investment is the act of acquiring assets outside one’s home country. These assets may be financial, such as bonds, bank deposits and equity shares or they may be so-called direct investment and involve the ownership of means of production such as factories and land. Direct investment is considered to take place also if the ownership of equity shares provides control over the operation of a firm. Johnson (1970) has suggested the expansion of the concept of foreign investment so that it parallels the modern Fisherian approach and distinguishes physical, human and knowledge capital. Accordingly, schooling abroad and technology transfers through the purchase of patents and licences represent foreign investment broadly defined.

This is a preview of subscription content, log in to check access.


  1. Behrman, J.H., and W.A. Fischer. 1980. Oversees RD activity of transnational companies. Cambridge, MA: Oelschlager, Gunn and Hain.Google Scholar
  2. Bhagwati, J. 1971. The general theory of distortions and welfare. In Trade, balance of payments and growth, ed. J. Bhagwati et al. Amsterdam: Elsevier, North-Holland.Google Scholar
  3. Black, J., and J.H. Dunning (eds.). 1982. International capital movements. London: Macmillan.Google Scholar
  4. Buckley, P.J., and M.C. Casson. 1976. The future of multinational enterprise. London: Macmillan.CrossRefGoogle Scholar
  5. Caves, R.E. 1971. International corporations: The industrial economics of foreign investment. Economica 38: 1–27.CrossRefGoogle Scholar
  6. Caves, R.E. 1982. Multinational enterprise and economic analysis. Cambridge/New York: Cambridge University Press.Google Scholar
  7. Dunning, J.H. 1977. Trade, location and economic activity and the multinational enterprise: A search for an eclectic approach. In The international allocation of economic activity, ed. B.P. Ohlin, P.O. Hesselborn, and P.J. Wiskman. London: Macmillan.Google Scholar
  8. Dunning, J.H. 1981. Explaining the international direct investment position of countries: Towards a dynamic or development approach. Weltwirtschaftliches Archiv 117(1): 30–64.CrossRefGoogle Scholar
  9. Grubel, H.G. 1968. Internationally diversified portfolios: Welfare gains and capital flows. American Economic Review 58(5): 1299–1314.Google Scholar
  10. Grubel, H.G. 1974. Taxation and rates of return from some US asset holdings abroad. Journal of Political Economy 82(3): 469–487.CrossRefGoogle Scholar
  11. Hufbauer, G., and M. Adler. 1968. Overseas manufacturing investment and the US balance of payments. Washington, DC: US Treasury Department.Google Scholar
  12. Hymer, S.H. 1976. The international operations of national firms: Study of direct foreign investment. Cambridge, MA: MIT Press. (PhD dissertation, MIT, 1960).Google Scholar
  13. Iversen, C. 1936. International capital movements. Oxford: Oxford University Press.Google Scholar
  14. Johnson, H.G. 1970. The efficiency and welfare implications of the international corporation. In The international corporation, ed. C.P. Kindleberger. Cambridge, MA: MIT Press.Google Scholar
  15. Kindleberger, C.P. 1968. American business abroad. New Haven: Yale University Press.Google Scholar
  16. Kojima, K. 1978. Direct foreign investment. London: Croom Helm.Google Scholar
  17. Lall, S., and P. Streeten. 1977. Foreign investment, transnationals and developing countries. London: Macmillan.CrossRefGoogle Scholar
  18. MacDougall, G.D.A. 1960. The benefits and costs of private investment from abroad: A theoretical approach. Economic Record 36(73): 13–35.CrossRefGoogle Scholar
  19. Myrdal, G. 1956. Development and underdevelopment. National Bank of Egypt: Cairo. Reprinted in Leading issues in economic development, ed. G. Meier. New York: Oxford University Press, 1970.Google Scholar
  20. Reddaway, W.B. 1968a. Effects of UK direct investment overseas. Cambridge: Cambridge University Press.Google Scholar
  21. Reddaway, W.B. 1968b. Effects of UK direct investment overseas: Final report. Cambridge: Cambridge University Press.Google Scholar
  22. Rugman, A.M. 1979. International diversification and the multinational enterprise. Lexington: D.C. Heath.Google Scholar
  23. Stopford, J.M., and J.H. Dunning. 1983. Multinationals: Company performance and global trends. London: Macmillan.Google Scholar
  24. United Nations. 1973. Multinational corporations in world development. New York: United Nations.Google Scholar
  25. United Nations. 1978. Transnational corporations in world developments: A reexamination. New York: United Nations.Google Scholar

Copyright information

© Macmillan Publishers Ltd. 2018

Authors and Affiliations

  • Herbert G. Grubel
    • 1
  1. 1.