Arizona State University (ASU) MGT302 Principles of International Business Exam 3 Practice

Foreign direct investment (FDI) refers to investment made by a company or individual in one country in business interests or assets located in another country. This typically involves the acquisition of local assets, such as establishing a subsidiary, joint venture, or acquiring a stake in a foreign company. By engaging in FDI, investors gain significant control over their foreign investments and can influence the operations of the acquired business.

The focus on acquiring local assets in another country emphasizes the aspect of control and the long-term commitment associated with FDI, distinguishing it from other types of investments that may not involve such a direct and active engagement in foreign operations. This is what makes option B the correct choice, as it perfectly captures the essence of foreign direct investment.

In contrast, the other options do not accurately reflect the definition of FDI. Investments made in commodities within the home country pertain to domestic transactions, while funds transferred without ownership change refer to portfolio investments or other financial transactions that do not involve significant control over assets. Lastly, investments in digital currencies represent a different category of investment that does not necessarily relate to physical assets or direct investment in foreign businesses.