The investment development path of newly developed countries

Juan Duran and Fernando Ubeda

International Journal of the Economics of Business, 2005, vol. 12, issue 1, 123-137

Abstract: According to foreign direct investment (FDI) path theory, developed countries are grouped into two phases, known as the fourth and fifth phases. Fourth-phase countries (newly developed economies) show a technological and institutional "gap" in comparison with fifth-phase economies, which explains their lesser capacity to generate direct investment. We found that these countries, which were less developed economies in the 1980s, had undergone a deep structural transformation. This transformation encouraged the multinationalization of firms, which is a differentiating element and one outcome of their development process. These results have clear policy implications: the governments of newly developed countries should take steps to increase the endowment of knowledge-intensive assets. The main contribution of this paper is the theoretical reformulation of the fourth phase of the investment development path theory.

Keywords: Investment Development Path; Outward Direct Investment Stock; Inward Direct Investment Stock; Economic Development; Technological Gap; JEL Classifications: F21; F23; F43 (search for similar items in EconPapers)
Date: 2005
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DOI: 10.1080/1357151042000323076

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