Which type of FDI involves investing in a company that produces the same products in other countries?

Horizontal foreign direct investment (FDI) refers to the practice of a company investing in a foreign business that operates in the same industry and produces similar products. By engaging in horizontal FDI, a firm effectively expands its market reach by establishing a presence in multiple countries, providing similar goods or services in those markets.

This strategy allows companies to capitalize on local demand, leverage economies of scale, and compete more effectively against local and global rivals. In contrast, the other types of FDI mentioned focus on different aspects of the supply chain. Backward-vertical FDI involves investing in companies that supply raw materials or components to the firm, while forward-vertical FDI pertains to investing in distribution or retail operations that directly sell the products. Leveraged FDI does not specifically reference a type of investment based on product similarity or market expansion but rather addresses investment strategies involving borrowed funds. Thus, the emphasis in horizontal FDI on producing the same products in various countries is what makes it the right choice.