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A number of studies reported support for the theory that FDI benefits growth:4 Reisen and Soto (2001) report that foreign portfolio and direct investment boost growth. Basu and Guariglia (2007) conclude the link between FDI and growth is positive and significant in 119 countries (as is FDI and income inequality).

Advantages for the company investing in a foreign market include access to the market, access to resources, and reduction in the cost of production. Disadvantages for the company include an unstable and unpredictable foreign economy, unstable political systems, and underdeveloped legal systems.

Investment adds to the stock of capital, and the quantity of capital available to an economy is a crucial determinant of its productivity. Investment thus contributes to economic growth.

In the various ways outlined above, foreign portfolio investment can help to strengthen domestic capital markets and improve their functioning. This will lead to a better allocation of capital and resources in the domestic economy, and thus a healthier economy.

How might foreign investment be problematic for a transitioning economy? Foreign investment can temporarily slow economic growth. It may be difficult to adjust to another nation's influence. A foreign government may seize control of the country.

Job Creation and Employment: Most foreign direct investment is designed to create new businesses in the host country, which usually translates to job creation and higher wages. Technology Transfer: Foreign direct investment often introduces world-class technologies and technical expertise to developing countries.

Foreign direct investment impacts the U.S. economy in many positive ways. For example, FDI: Creates New Jobs: U.S. affiliates of foreign companies (majority-owned) employ approximately 5.3 million U.S. workers, or 4.6% of private industry employment.