Question

please answer on question.

Compare horizontal and vertical FDI impact on the volume of international trade and the economies of home and host countries.

Answer 1

Foreign Direct Investment (FDI) can be defined as the investment undertaken by an individual or an organization in some other country’s business. There are generally three types of FDI that are horizontal FDI, vertical FDI, and conglomerate FDI.

The horizontal FDI takes place when the investment is made in same type of business of some other country. On the other hand, vertical FDI takes place when the investment is made in related business in some other country.

Both horizontal FDI and vertical FDI increase the volume of international trade. There is an increase in the volume of exports when the countries undertake horizontal or vertical FDI. The horizontal FDI increases the economic growth of the developed host or source countries. Whereas, the vertical FDI increases the economic growth of developed source country and developing host country.

The economic effect of horizontal FDI is more superior than the vertical FDI in developed countries.