What does direct foreign investment (DFI) involve?

Direct foreign investment (DFI) refers to investments made by individuals or businesses in one country (the home country) in tangible assets such as real estate or businesses located in another country (the host country). This typically includes establishing operations like manufacturing plants or retail outlets, or acquiring existing local businesses.

This choice captures the essence of DFI as it highlights the focus on foreign capital being directly invested into local enterprises or properties. Such investments are characterized by the investor having a significant degree of control or influence over the operations and decisions of the business.

The other options do not accurately describe DFI. Joint ventures involve collaboration with local businesses but do not necessarily imply direct foreign investment as they might not always include a significant capital investment in local operations. The purchase of domestic businesses by citizens pertains to domestic investment, which is not relevant when discussing cross-border capital flows. Exporting products to foreign countries relates to international trade rather than investment, as it does not involve acquiring ownership or control of businesses or assets abroad.