This paper extends the standard theory of corporate international investment in an environment where the segmentation of international capital markets provides some independence to corporate decisions. The model is an extension of the results in Choi (1989) to show that real exchange risk, the competition between firms in different markets and diversification gains affect corporate international investment. By accounting for the degree of competition between firms, the model embodies different existing explanations based on economic and behavioral variables. Usfiing a "two-country" firm model, we show that real exchange risk, diversification motives and the degree of competition between firms are important elements in the determination of corporate international investment decisions. The dynamic portfolio model reects the main results in several theories of foreign direct investment. Using optimal control methods, we provide the general solution for the profiportion of firm's total capital budget. We also use a new method to get explicit solutions in some special cases. This new method can be applied to solve other financial control problems.