Foreign direct investment and international trade in globalization
Foreign direct investment and international trade in globalization

Summary/Abstract: The increased foreign direct investment (FDI) worldwide and the influence of transnational corporations (TNCs) in international economy are main characteristics of a new world economy. In the era of globalization TNCs, as main driving forces of international flow of capital in the form of FDI, become a major factor in international trade. The objective of research in the paper is the relationship between FDI and international trade. The paper starts with a brief history of theoretical approach to FDI. During the 1990s, new trade theories incorporated FDI as an important factor in the international trade. Horisontal FDI suggests that FDI and trade are substitutes whereas vertical FDI suggests a complementary relationship. Selected indicators of FDI and international production in the paper show the importance of TNCs in the international economy.One of the contributions of FDI is to increase the host-country exports. Comparing FDI’s inflow and outflow by groups of countries and their import and export of goods and services, the paper researches the relation between FDI and international trade in the host-country. In this context, the impact of FDI on the host-country export will defer, depending on its motives, whether it is efficiency-seeking, market-seeking, resource-seeking or strategic-assets-seeking.

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