With this research we aimed to investigate the factors that determine the investment decision of foreign investors in the Brazilian industry. Evidence shows that foreign investors are attracted not only by more productive and best performing sectors, but depending on the adopted strategy, they may choose investment projects in sectors that have lower performance levels and offer potential of growth and the improvement of efficiency levels. Granger causality test indicated that not only foreign investment generate productivity gains, but also productivity induces more foreign investment inputs. Foreign investors are also attracted by those sectors using their assets inefficiently that offer potencial to generate profits. These sectors may be attractive to investors seeking a more aggressive growth policy in order to get advantages on the availability of inefficiently used assets. These sectors may be also attractive targets to investors who seek to compete directly in relatively less competitive sectors.
