Foreign direct investment (FDI)

When a foreign investor sets up a new operation in a country, or buys an existing business. FDI is distinct from portfolio investment, the purchase of a small stake in a business by a pension fund or sovereign wealth fund. FDI can boost productivity, by bringing new technology and upgrading the skills of domestic workers. It expanded rapidly at the end of the 20th century. But governments can be suspicious if a foreign company takes over an industry in an area (like technology or defence) which is perceived to be strategically important.