Final answer:
The two main types of FDI are Horizontal FDI and Vertical FDI, which refer to establishing the same type of business operations or expanding along the supply chain in a foreign country, respectively.
Step-by-step explanation:
The two main types of FDI are Horizontal FDI and Vertical FDI.
Horizontal FDI refers to when a company establishes the same type of business operations in a foreign country as it does in its home country. For example, if a U.S. automobile manufacturer sets up a factory in China to produce cars, it would be considered horizontal FDI.
Vertical FDI, on the other hand, involves a company expanding its operations along the supply chain in a foreign country. This can include forward integration, where a company invests in distribution or retail activities, or backward integration, where a company invests in raw material production or supplier activities. An example of vertical FDI would be a U.S. technology company investing in a factory in Taiwan to produce electronic components.