The International Competition for Investment

Since the industrial revolution, countries have been in an international competition for investment, whether or not they know it or consciously adopt the policies that have such large influence on the competition’s outcome. Part of this competition is for domestic investment and part for foreign investment; in the present world of high and growing interdependence and integration among industrialized countries, the two types of investment often go together. Policies favorable for domestic investment very often attract foreign direct investment (FDI); similarly, policies that make domestic investment unattractive often discourage inward FDI and encourage outward FDI as home companies and residents look abroad for better uses of capital.