Investment Development Path Research Articles

Investment development path for developed economies: Is agriculture different?

Abstract Literature reports that developed countries are expected to be in stage IV or V (high economic development) in the investment development path (IDP). Knowing the IDP stage of a country shows the cross-border attractiveness of the economy, the circuitousness of firms expanding beyond the home border, and an indication for the formulation of appropriate economic policies. As this theoretical proposition is based on the total economy, we investigated the plausibility of this theory for the agricultural sector in developed countries. Using the generalised least squares estimator, we employed data on 26 developed countries from 1990 to 2021. We found that developed countries’ agriculture is in the first phase of stage V. This is consistent with the theoretical background for developed countries regarding the total economy and demonstrates how the IDP theory for industrialised countries’ overall economies and their agricultural systems are compatible. Agricultural multinationals in developed countries must continue to get globalised through a more interlocking network of trans-border supportive arrangements such as production and market sharing. Moreover, additional acquisition of farm assets and development of the same would balance place-bound assets, leading to further fluctuation of the net outward foreign direct investment and creating smaller transient amplitudes of the curve.

Impact of Ownership-Location-Internalization (OLI) Paradigm and Investment Development Path (IDP) on Gravity Model of Foreign Direct Investments in Eastern Europe and Central Asia (EECA) Region

This study investigates the impact of OLI paradigm and the IDP on the gravity model of FDI in EECA region. Using panel data from 1995 to 2017, the analysis employs POLS, Fixed Effects, and Random Effects estimation methods to examine the determinants of FDI inflows. The results highlight the significance of the receiving country's GDP and labour market quality as the most consistent and statistically significant factors influencing FDI inflows. The distance between source and receiving countries also exhibits a negative relationship with FDI flows. Other variables, such as the source country's GDP, tertiary education, institutional governance, taxation, infrastructure, foreign exchange rates, and labour costs, do not show consistent or statistically significant effects across the estimation methods. The Fixed Effects model demonstrates the highest explanatory power, suggesting its suitability for capturing the variation in FDI inflows. These findings contribute to understanding the determinants of FDI and provide insights for policymakers and investors. Countries aiming to attract FDI should focus on promoting economic growth, improving labour market conditions, and reducing perceived distances between source and receiving countries.

The theory of the investment development path and agriculture in Eastern Europe

The outdated investment development path results in Eastern Europe and the lack of focus on the agricultural sector necessitated this study. The generalised least squares estimator employed countries from 1993 to 2021 for agricultural sector data on 17 Eastern Europe. Eastern European agriculture is in the early phase of stage IV of the investment development path, consistent with the theory of the investment development path. Human capital enhanced net foreign direct investment. Agricultural trade openness, exchange rate, and inflation did not influence net foreign direct investment. Developed and transition countries in Eastern Europe were not distinguished regarding net foreign direct investment. Eastern European countries must increase agricultural growth relative to population growth. This would increase agricultural development. The increased income can be saved and channelled into domestic investments to spur additional growth. This would make capital available for export. The growth in human capital must be sustained to enhance technical know-how in agriculture that would accompany agricultural capital export. Agricultural sector managers of Eastern European countries must focus on enhancing the sector's supervisory and regulatory functions. The goal should be to reduce the costs of doing agricultural business through effective facilitation towards efficient agricultural markets.

The determinants of Vietnam’s outward foreign direct investment: the push factors approach

In the context of integration, in addition to increasing foreign capital inflows, Vietnamese enterprises are becoming more and more interested in outward foreign direct investment activities. This research expands the Investment Development Path model to assess the influence of some macroeconomic factors (GNI per capita, the proportion of expenditure on science and technology, FDI flows, USD to VND exchange rate, total import-export turnover) on Vietnam's outward foreign direct investment (OFDI) flows. Using the 32-year dataset (1989-2020), the regression results depict that the proportion of expenditure on science and technology, the amount of FDI, GNI per capita had a positive impact on the capital OFDI of Vietnam. However, the growth rate of total import-export turnover harmed OFDI flows in the same period. Meanwhile, the difference variable of exchange rate USD to VND in the multiple regression model was not statistically significant. Based on regression model results combined with qualitative studies, the authors propose some policy implications to promote OFDI flows of Vietnam in the near future.

The Investment Development Path Theory: Empirical Evidence from Global Data

Considering the changing foreign investment environment and composition of countries in the development classifications, we examined the investment development path (IDP) based on data from 137 countries over 29 years (1991 to 2019). Categorising the countries into developing, emerging, and developed, we found developing countries to be in stage IV, ahead of theoretical stage II. Emerging economies are in stage II, a step below the theoretical stage III. Only developed countries have maintained their position in stage V as proposed by the IDP theory. Globally, the data shows countries have traversed stages I, II, III, IV and V. Firms in developing countries must maintain their competitive advantage whilst relocating operations with waning competitive advantage abroad. Emerging economies must grow their economies faster than the current rate. The extra income should support an ambitious foreign investment policy that would escalate the current level of outward foreign direct investment. Governments in developed countries must pursue the role of “strategic oligopolists”, recognising and monitoring the conduct of other governments in the development and implementation of their multinational enterprise development strategies.

The Investment development path theory: Evidence from developing countries' agricultural sector.

We examined the investment development path (IDP) through the perspective of developing countries' agricultural sector. Our analytical approach indirectly accounts for interactions among countries regarding cross-border resource transfers. Aside from providing knowledge on testing the IDP by inferential statistics, the information would be relevant for policymaking. Identifying the stage(s) in the IDP not only highlights the global appeal of agriculture but also guides firms seeking to expand beyond borders. This information is essential for developing an effective economic strategy. We employed data from 1991 to 2021 for 55 countries from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) and applied a fixed effects estimator corrected for serial correlation and non-constant variances. We found that agriculture in developing countries is currently in stages I and II of the IDP. Broadly, agricultural production requires policies that would increase outward foreign direct investment and inward foreign direct investment. Domestic agricultural businesses in developing countries must develop capacity by learning from foreign multinationals. This would enable agricultural businesses to invest abroad. Such a move would lead to an increase in outward FDI. As this would have resulted from increased GDP per capita, it will lead to movement from the existing stage to higher ones.

The Investment development path theory: Evidence from developing countries’ agricultural sector

Background We examined the investment development path (IDP) through the perspective of developing countries’ agricultural sector. Our analytical approach indirectly accounts for interactions among countries regarding cross-border resource transfers. Aside from providing knowledge on testing the IDP by inferential statistics, the information would be relevant for policymaking. Identifying the stage(s) in the IDP not only highlights the global appeal of agriculture but also guides firms seeking to expand beyond borders. This information is essential for developing an effective economic strategy. Methods We employed data from 1991 to 2021 for 55 countries from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) and applied a fixed effects estimator corrected for serial correlation and non-constant variances. Results and conclusions We found that agriculture in developing countries is currently in stages I and II of the IDP. Broadly, agricultural production requires policies that would increase outward foreign direct investment and inward foreign direct investment. Domestic agricultural businesses in developing countries must develop capacity by learning from foreign multinationals. This would enable agricultural businesses to invest abroad. Such a move would lead to an increase in outward FDI. As this would have resulted from increased GDP per capita, it will lead to movement from the existing stage to higher ones.

A quantitative and qualitative macroeconomic and sociopolitical outlook of the MEDA transitional economies: development-paths, governance climate, and sociocultural factors

<p>We present a quantitative and qualitative macroeconomic and sociopolitical outlook of the South-East Mediterranean transitional economies (MEDA), aiming to understand their development challenges and growth potential. We used various analytical techniques integrated in this study, including macroeconomic indicators, SWOT analysis, clustering, Markovian chains, investment development-path, and sociocultural factors. MEDA countries differ principally due to varying levels of oil dependence, underdeveloped manufacturing systems, and high unemployment rates. Despite various efforts, institutional deficiencies and a lack of governance persist, hindering countries' growth and attractiveness. Finally, the importance of international cooperation, particularly with the European Union, to support MEDA transitional economies in addressing governance issues, enhancing human development, and fostering internal stability is highlighted.</p>

The Investment Development Path theory: Evidence from developing countries’ agricultural sector

Background: We examined the investment development path (IDP) through the perspective of developing countries’ agricultural sector. Our analytical approach indirectly accounts for interactions among countries regarding cross-border resource transfers. Aside from providing knowledge on testing the IDP by inferential statistics, the information would be relevant for policymaking. Identifying the stage(s) in the IDP not only highlights the global appeal of agriculture but also guides firms seeking to expand beyond borders. This information is essential for developing an effective economic strategy. Methods: We employed data from 1991 to 2021 for 55 countries from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) and applied a fixed effects estimator corrected for serial correlation and non-constant variances. Results and conclusions: We found that agriculture in developing countries is currently in stages I and II of the IDP. Broadly, agricultural production requires policies that would increase outward foreign direct investment and inward foreign direct investment. Domestic agricultural businesses in developing countries must develop capacity by learning from foreign multinationals. This would enable agricultural businesses to invest abroad. Such a move would lead to an increase in outward FDI. As this would have resulted from increased GDP per capita, it will lead to movement from the existing stage to higher ones.

Subsidiary divestment of EMNEs – Does home country matter?

This research is a response to a call for studies addressing the issue of de-internationalization in the context of emerging countries. It does so by examining the divestment of foreign subsidiaries of Brazilian multinational firms. Adopting the Institutional-Based View and Dunning’s Investment Development Path, the study investigates whether institutional characteristics of the home country environment influence the divestment of emerging market multinational enterprises. The results indicate that receiving governmental financial support to establish foreign subsidiaries can lead to higher rates of divestment. Furthermore, divestment tends to be higher when an enterprise’s home country counterparts are divesting from the same host country. Conversely, having market supporting institutions in the home country diminishes the likelihood of foreign divestment.

Determinants of Outward FDI from Developing Economies: Evidence for a Sample of Latin American Countries

Grounded on a conceptual framework that combines contributions from the investment development path (IDP) theory, the Ownership, Location, Internalization (OLI) paradigm, and the institutional theory, this work aims to analyze the home country’s determinants of outward Foreign Direct Investments (OFDI). Based on panel data for a set of 14 Latin American countries between 2000 and 2019, the results of random effects estimations support the propositions of the IDP and institutional theories. Economic development, inward FDI, and institutional quality are strong determinants of OFDI. Results also highlight the role of the openness level and the membership of regional trade agreements in explaining OFDI from Latin America countries.

Impact of Foreign Direct Investments on the Hospitality Sectors in Ethiopia

Purpose: The study sought to analyze the impacts of foreign direct investments on the hospitality sectors in Ethiopia.
 Methodology: The study adopted a desktop methodology. Desk research refers to secondary data or that which can be collected without fieldwork. Desk research is basically involved in collecting data from existing resources hence it is often considered a low cost technique as compared to field research, as the main cost is involved in executive’s time, telephone charges and directories. Thus, the study relied on already published studies, reports and statistics. This secondary data was easily accessed through the online journals and library.
 Findings: The results show that showed that the success of the hospitality industry in developing countries depends on the levels of foreign direct investment. Although many developing countries have natural features such as beaches, rivers, and other natural resources, local capital to invest in those resources is unavailable. The tourism industry is one of the largest and fastest-growing sectors in the global economy and a key driver of socio-economic development, as it is labor-intensive and stimulates SME growth and investment. It has been used in other countries as an economic driver for growth which can widely support poverty reduction.
 Unique Contribution to Theory, Practices and Policies: The capital market theory, investment development path theory and the eclectic theory may be used to anchor future studies in the tourism sector. The study results will also benefit other stakeholders such as the policy makers as well as researchers and scholars from different parts of the world. The top management of hospitality management companies in the country will also use the study findings to improve tourism performance in all their activities and programs. The study recommends that the adoption of effective social protection development policies in the tourism sector will help to improve efficiency in their major operations and activities.

Pozycja Polski na ścieżce inwestycyjno-rozwojowej na tle wybranych krajów Europy Środkowo-Wschodniej

The concept of linking the position of a country in terms of inward and outward direct foreign investments and its economic development is the concept of the investment and development path - IDP (The Investment Development Path). The aim of the paper is an attempt to assess the development situation of the Polish economy against the background of selected economies of Central and Eastern Europe, in accordance with the above-mentioned concept. The analysis covers the years 1995–2020 and uses data from UNCTAD and the World Bank. On the basis of changes in the values of NOIP indicators and GDP per capita, it was found that in the case of Hungary and the Czech Republic, identification of the transition to one of the most significant stages on the investment and development path, which is stage III, is not difficult. However, it is debatable to identify the period in which Poland entered such a stage of development. This is due to, inter alia, from the low level of foreign direct investment.

Polish FDI in Germany – junior partner with any signs of rising strong?

The economic ties between neighbours are always in the spotlight. Polish-German relations are no exception in this regard, especially given a particularly pronounced asymmetry in the level of mutual direct investment – the flows and stocks of foreign direct investments (FDI). This paper aims threefold: to analyse the recent development trends of Polish investment in Germany, to characterise the profile of investing firms and identify possible patterns of Polish FDI in Germany and finally, based on the diagnosed challenges, to formulate some policy and managerial recommendations. Methodologically it draws on a descriptive analysis of investment figures and a qualitative approach in line with the grounded theory method (GTM) framed in classic FDI theories and concepts. Confrontation of previously (2012-2014) conducted projects with the recent reports or scholarly studies confirmed challenges identified earlier and demonstrated that not much has changed in this respect. Poland when it comes to outward foreign direct investment (OFDI) is still ‘punching below its weight’. Such reflection could be interpreted ambiguously. On the one hand, Polish investments in Germany fluctuate considerably often subject to single one-time investment decisions; on the other, more investments target promising niche sectors such as IT or urban mining. The still unsatisfactory levels of Polish OFDI (development along the investment development path - IDP) can be hence explained ‘pessimistically’ in terms of missing structural competitiveness but also more on a positive note, as a result of the unabating potential and absorptive capacity of the domestic market.

Foreign Direct Investments in Poland against Countries of Visegrad Group

In the period of scarcity of investment capital, foreign direct investment (FDI) is an important source of its acquisition. These investments flow to the host countries in various conditions and consequences for the economy. The concept of linking the country’s position in terms of inflow and outflow of foreign direct investments with its economic development is the concept of the investment and development path – IDP (The Investment Development Path). The article diagnoses changes in the value of foreign direct investment in Poland against economies of Visegrad Group in 1995-2020, taking into account the effects of the pandemic on changes in FDI flows in 2016-2021. Against this background, the development of the Polish economy was diagnosed in the light of the path theory (IDP). The analysis covers the years 1995-2020 and 2016-2021 and uses data from UNCTAD and the World Bank. In the periods selected for the analysis, one can notice definitely different dynamics of changes in the value of FDI liabilities. The reaction of foreign investors in selected location markets varied during the pandemic. The diversification of the cumulative value of FDI receivables for individual countries is significant. During the pandemic, investors reacted to the situation in different ways. Among the selected countries, an increase in the value of FDI undertaken abroad was recorded in Slovakia and the Czech Republic. Polish investors and investors from Hungary made investments with lower values than in 2020. In all years, NOIP for Poland takes negative values, so the level of FDI undertaken in Poland exceeds the level of investments undertaken abroad. Identifying the transition to one of the most important stages on the IDP path – stage III is difficult. It is debatable to determine the period in which Poland entered such a stage. This results, among others, from low FDI. It is indicated that this is a period from 2004 to even 2013.

KAZAKHSTAN AND ITS INVESTMENT DEVELOPMENT PATH

Historically, it turned out that the state cannot successfully develop without integration into the global economy. Although such integration is often associated with risks and high costs, these short-term factors overlap with long-term benefits. Foreign direct investment (FDI) is a criterion for this integration, and over the past 30 years, policies in developing countries have been increasingly focused on attracting them. This article attempts to explore the theory of investment development path (IDP according to Dunnings’s theory) of Kazakhstan which economy was considered as transitional, and its key component, the net external investment position, the starting point for data analysis is the beginning of Kazakhstan’s transition to the market system in 1991. The objective of the article is to identify at which stage Kazakhstan is situated. Many studies have been conducted among Western scientists and so far, not a single one among Kazakh scientists. The research was conducted empirically with data mainly from periodic reports published by the United Nations Confederation for Trade and Development (UNCTAD) entitled World Investment Report and studies by the National Bank of Kazakhstan. During the research, the author found out that Kazakhstan is in the second stage of its investment development path. The outcome of the research can be used in the work of state ministries of departments and in the teaching of economic disciplines on investment activities.

How Does Economic Integration Affect Progress along the Investment Development Path? A Case Study of EU Member vs. Non-Member Countries from Eastern Europe

1. Adams, R., Philippa D., Jyothi G. & McGuire, G. (2003) The trade and investment effects of preferential trading arrangements – old and new evidence. Working Paper. Productivity Commission, Canberra. Google Scholar

Reflections on FDI in an post-communist country in the context of EU membership: retrospectives and prospects

ABSTRACT Participation of a country in the European Union and hence the participation in the European single market, have obvious consequences for capital flows, including those in the most advanced form, i.e. foreign direct investment. Foreign direct investment is considered one of the major incentives of economic integration. Thus, this study reflects on the impact of EU membership on FDI inflows to Poland as an EU member and signals key priorities for further integration. The theoretical foundation of the study resides in the theses of the new theory of economic integration and the investment development path theory. The paper employs the descriptive approach and inductive reasoning. We highlight the benefits resulting from the position of Poland on the investment development path and indicate possible associated threats. Moreover, we discuss retrospective reflections, some of the prospects, and possible directions of action recommended to optimise the future benefits of hosting foreign investors.

The investment development path literature: a review and research agenda

This study is the first systematic literature review of the Investment Development Path (IDP) that applies a thematic analysis approach, encompassing 51 journal articles published in CABS-ranked journals from 1981 to 2021. This study differs from previous studies on IDP in terms of the methodology deployed and the research focus. The deployment of IDP literature is quite extensive, covering many aspects of the IDP concept. The analysis reveals that four themes arise from the IDP literature: the assessment of a country’s development in relation to the IDP concept, Foreign Direct Investment (FDI) phenomena in the IDP concept, the internal and external factors that influence a country’s position in the IDP stages, and further development of the IDP concept. These findings lead to the generation of a novel framework that represents the interrelationship between FDI performance and the economic development of a country relative to its position on the IDP stages. They also lead to the identification of five approaches to the classification of IDP stages based on economic development, FDI performance, locational advantages, the strategies of Multinational Companies (MNCs), and the role of government. These approaches can assist researchers, policymakers, and firms in classifying a country on the IDP stages.

Outward FDI in China’s hotel industry: An inward FDI perspective

Outward foreign direct investment (OFDI) from emerging economies in the hospitality industry, the hotel sector in particular, has drastically increased in recent years. Based on Dunning's eclectic paradigm/Ownership-Location-Internalization (OLI) theory and the Investment Development Path (IDP) theory, the OFDI in the hotel sector was assessed from the home country's perspective using an inward FDI (IFDI) approach. Using China as a case study, this paper employed panel data and a negative binomial regression method to examine the impact of IFDI on hotel OFDI. The empirical findings showed that hotel-related IFDI is an important source of the ownership advantage of China's hotel OFDI. Meanwhile, China's IFDI in the hotel industry appear to exert positive and significant effects on its hotel OFDI. Furthermore, international market proximity, economic development, and tourism development were found to moderate significantly these effects. Finally, additional robustness checks showed that the results are reliable.