What Is an Outward Direct Investment?

An outward direct investment (ODI) is a business strategy in which a domestic firm expands its operations to a foreign country. This can take form as a green field investment, a merger/acquisition, or expansion of an existing foreign facility. Employing outward direct investment is a natural progression for firms if their domestic markets become saturated and better business opportunities are available abroad.

Understanding Outward Direct Investment (ODI)

The extent of a nation's outward direct investment can be seen as an indication that its economy is mature. American, European, and Japanese firms, for example, have long made extensive investments outside their domestic markets. Because of their more rapid growth rates, emerging market economies often receive large amounts of ODI, as China has for the past two decades. But even some emerging market countries have begun to make investments abroad. Chinese companies are now engaged in large-scale outward direct investments. In 2015, Chinese overseas investment exceeded foreign direct investment (FDI) in China for the first time ever. In 2016, Chinese companies invested over $170 billion overseas.