Features of foreign investment in the context of globalization

Rozita Susniene, Irena Pekarskiene

Abstract


The globalization of national economies and markets is a noticeably prominent tendency in recent decades, and foreign investment is one of the most prominent features of the global economy. In global economy financial capital crosses national borders without any difficulty and moves to the markets where there is a big demand for it and where a higher profit is guaranteed. The expanding economic globalization process and growing flows of foreign investment (especially FDI) were induced by a complex interaction of technological change, evolving corporate strategies toward a more global focus and major policy reform in individual countries. The motive and aim of investors as well as investment attracting factors are being modified under the impact of globalization. Growing foreign investment flows, in particular FDI flows, are a significant factor of economic globalization process, and are considered to be one of the driving forces of globalization, and its most prominent manifestation at the same time. Therefore a query should be discussed: is foreign investment a primary or is it the main consequence of globalization process? Probably there could be no an unambiguous answer, since evaluation of the impact of foreign investment differ according to different features of investing or host country, i.e. its economic development, size, openness of economy, etc.

Purpose. The purpose of the paper is to analyse new features of foreign investment and to present a new approach to foreign investment in the context of economic globalization.

Methodology. Systematic, comparative, logical scientific literature analysis and empirical research employing systemic analysis of external secondary data are applied in the paper.

Results. Foreign portfolio investment and FDI have different motivation and status, terms and conditions, these two kinds of investment are differently influenced by globalization process. Portfolio investment is operating in and interconnected with the global financial market; an evaluation of the role of portfolio investment is related to a short-term period. Whereas FDI is more involved in economic globalization process, is considered to be more stable and related to a long-term period. FDI reveal itself as a main globalization factor in developed economies with a big local market. On the contrary, FDI may be considered as a consequence of economic globalization in small countries with open economies. In the context of economic globalization not only traditional factors should be analysed but also new specific factors, characteristic for contemporary globalization process, are being determined.

The theoretical contribution. A new approach to foreign investment, new investment trends, impact, attracting factors and its role in economic globalization process is presented.

Keywords: foreign investment, economic globalization, foreign direct investment, impact of globalization.

Paper type: Theoretical paper.


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