Abstract
Exploring the circumstances under which a nation begins to trade outside its own borders, as well as the ways in which international trade provides the necessary conditions for the occurrence of FDI, classical and neoclassical theories of international trade used to be indirectly concerned with the characteristics of FDI. On the other hand, modern FDI theories, to which special attention will be paid in this paper, explicitly speak of the occurrence of FDI, as well as the incentives and determinants of FDI inflows in the host country. By analyzing various modern theories, one finds the answer to the question: Why does a company decide to invest beyond the borders of its home country and why does it select a particular country for its investment location, i.e. for its host country.
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