A New Agenda
New Horizons in International Business series
Chapter 4: Incorporating Trade into the Investment Development Path
INTRODUCTION This chapter1 has an explicit purpose. It is to take a ﬁrst step in incorporating trade levels and patterns into the notion of the investment development path (IDP), a notion which seeks to relate the stock of inward and outward direct investment (inward FDI and outward FDI) position of countries to their stages of development and economic structures. The chapter proceeds as follows. In the following section, we present a truncated overview of the IDP, and why we believe that, by relating its trajectory to the changing level and patterns of trade, namely the trade development path (TDP), we may better understand the combined interaction between the two modes of cross-border transactions and the pace and pattern of economic development. We brieﬂy describe the contents of the IDP and TDP and formulate a number of general propositions. Then we set out some speciﬁc hypotheses, which seek to relate the changing sectoral structure of trade and FDI in Korea and Taiwan over the last 30 years to the growth of their gross national product (GNP) per capita. The last part brieﬂy summarizes our conclusions. SOME ANALYTICAL ISSUES The IDP The IDP seeks to explain the international direct investment position of a country in terms of the juxtaposition between the locational attractions of its endogenous resources, capabilities and markets, vis-à-vis those of other countries, and the ownership or competitive advantages of its ﬁrms vis-à-vis those of other nationalities.2 More speciﬁcally, it avers that, as countries...
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