Definition: Horizontal FDI

Category: Foreign direct investment

A company "duplicates" its production chain in order to place its production closer to foreign markets. The investment decision may result from a trade-off between fixed costs (the new plant) and variable costs (high tariffs and transport costs associated with exporting to that country). Large markets tend to be more competitive, making imports less attractive, and it is there that major investors tend to carry out this type of investment. Acting as a substitute to trade, horizontal FDI gives investors strategic market access and reduces delivery time. http://ec.europa.eu/eurostat/ramon/coded_files/fdi_yearbook_2007.pdf