While foreign investment and capital penetration have become key predictor variables in many studies of economic development and social change, much less scrutiny has been applied to these phenomena as outcomes of intranational characteristics. In this crossnational, quantitative study of the determinants of growth of foreign investment and capital penetration, the growth of both phenomena is found to be similar and can be partially explained by common models based on the logic of market orientation. Moreover, such phenomena as foreign capital penetration in manufacturing and overurbanization are positively related to this growth, suggesting that previous research has misspecified certain relationships and that certain elements of the dependentdevelopment approach to dependency theory require refinement or modification. Foreign investment plays a central role in theories and empirical investigations of international development. While conventional perspectives arising from modernization theory view direct, private foreign investment in developing economies as an asset in the developmental struggles of the Third World, newer theories stressing economic dependency and core-periphery relations consider foreign investment the prime culprit in many Third World social ills, such as inadequate labor absorption, overurbanization, lagging fertility decline, and retarded economic growth (Wallerstein 1974; Chase-Dunn 1975; Evans & Timberlake 1980; Timberlake & Kentor 1983; Bornschier & Chase-Dunn 1985; Bradshaw 1987; London 1987, 1988). The most consistent support for these newer critical perspectives has come from the dependent-development strand of dependency thought, which views the process of capital accumulation as evolving over time. Specifically, the old colonialism of the mercantile capitalist era with its feudal interaction patterns and unequal exchange has shifted gradually to dependent capitalism, or to *Direct correspondence to the authorat theDepartmentof Sociology, 190North OvalMall, 300 Bricker Hall, The Ohio State University, Columbus, OH 43210-1353. i) The University of North Carolina Prs Social Forces, June 1991, 69(4):1169-1182 This content downloaded from 157.55.39.45 on Wed, 05 Oct 2016 05:25:34 UTC All use subject to http://about.jstor.org/terms 1170 / Social Forces 69:4, June 1991 the location of industrial capital in developing countries. In other words, colonialism has been replaced by a more subtle but no less effective neocolonialism (Galtung 1971; Cardoso & Faletto 1979; Bornschier & Chase-Dunn