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FOREIGN DIRECT INVESTMENT Introduction: Some firms choose to establish operation in a host country at the beginning of their internationalization effort, while others prefer to use one of the other entry methods initially, and later invest in facilities in the host country. FDI is attractive not only for its profit potential, but also because, but also because a firm has increased control over its foreign operations. Control is important to firms because it allows firms to closely coordinate the activities of its foreign subsidiaries to achieve strategic synergies, and because control may be necessary to fully exploit the economic potential of an ownership advantage. FDI is also attractive if host country customers prefer to deal with local factories. However, FDI is riskier and more complex than other types of entry strategies. In some cses, government actions encourage firms to invest in local operation (through such policies as the availability of political risk insurance),...

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