Outward Direct Investment - ODI

DEFINITION of 'Outward Direct Investment - ODI'

A business strategy where a domestic firm expands its operations to a foreign country either via a Green field investment, merger/acquisition and/or expansion of an existing foreign facility. Employing outward direct investment is a natural progression for firms as better business opportunities will be available in foreign countries when domestic markets become too saturated.

BREAKING DOWN 'Outward Direct Investment - ODI'

The increase of a nation's outward direct investment can be seen as a proxy that the nation's economy is booming to the extent that sufficient risk capital is available for further ventures. For example, in the 1990s foreign firms entered China and gave a large influx of foreign capital into the Chinese economy. As a result of subsequent economic activity in the years to come, China's economy flourished to the point where Chinese companies now engaged in large scale outward direct investments. In fact, in 2005 Chinese companies spent over $6.9 billion in ODI.

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