Direct Investment Abroad

Direct investment abroad, also known as “outward direct investment,” happens when a business decides to expand its roots to the great beyond, i.e., a foreign country. When the market gets full at home (like, you already own 100% of it), there’s nowhere to go but abroad.

Direct investment abroad can take many forms. Think about the result of a merger, or a “green field investment” (when a parent company builds a new child-outpost abroad). That entity then makes more of the parent's product and sells it locally in that foreign country.

Why do companies push this element? Well, because many protectionist countries that can't compete in the brutal global markets only want to buy product made within their borders.

From a macroeconomic standpoint, the more direct investment abroad that exists, the more mature the economies of those industries are becoming. If it’s too crowded at home to expand business more profitable-y than abroad, and if the economy depends on growth, what choice do you have other than directly investing to seed your future business?