Theories and Paradigms of International Business Activity

Theories and Paradigms of International Business Activity

The Selected Essays of John H. Dunning, Volume I

John H. Dunning

This volume contains a selection of John Dunning’s best known and highly acclaimed writings on the theory of international business activity. Spanning more than three decades, the 16 contributions trace the evolution of his thoughts and ideas as an economist, from his first article on the determinants of international production, published in 1973, to his most recent essay on relational assets, networks and global business activity, completed in 2002.

Chapter 5: The Investment Development Path Revisited

John H. Dunning

Subjects: business and management, international business


* INTRODUCTION This chapter considers the interaction between inward and outward direct investment, the role of governments, and the upgrading and restructuring of the indigenous assets of countries, from a dynamic or developmental perspective. It particularly examines the impact of some changes now occurring in the global economy on the nature and course of economic development and restructuring, and on the role which both governments and MNEs can play in influencing that development and restructuring. SOME THEORETICAL ISSUES The Nature of the Investment Development Path The notion that the outward and inward direct investment position of a country is systematically related to its economic development, relative to the rest of the world, was first put forward by the present writer in 1979, at a conference on ‘Multinational Enterprises from Developing Countries’ which took place at the East West Center at Honolulu.1 Since then the concept of the investment development path (IDP)2 has been revised and extended in several papers and books (Dunning, 1981, 1986, 1988a, 1993; Narula 1993, 1996; Dunning and Narula, 1994). The following paragraphs summarize the state of thinking on the nature and characteristics of the IDP. The IDP suggests that countries tend to go through five main stages of development and that these stages can be usefully classified according to the propensity of those countries to be outward and/or inward direct investors. In turn, this propensity will rest on the extent and pattern of the competitive or ownership-specific (O) advantages of the indigenous firms of the countries...

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