Incorporating Trade into the Investment Development Path: A Case Study of Korea and Taiwan

Abstract

We suggest that there is some interface between the investment development path (IDP) and the trade development path (TDP)-with both trade and foreign direct investment (FDI) of created asset-intensive products increasing their signi cance relative to gross national product (GNP) of countries. The proportion of intra-industry trade and FDI to total trade and FDI also increases as an economy develops, particularly so for created asset-intensive products. We have taken the FDI intensity of manufacturing sectors as a proxy for a created asset intensity, and classi ed it into three categories, viz. above, average and below created asset intensities. Trade and FDI data from the Korean and Taiwan economies between 1968 and1997 generally support the idea of an integrated TDP and IDP. The growth of trade and FDI tends to be positively correlated with GNP per capita and with the created asset intensity of products.

Foreign divestment in the integration development path of Greece

“…There is a relatively rich literature on IDP however focusing on investment and development (e.g., Dunning et al, 2013;Buckley, 2012;Ragoussis, 2011;Narula and Dunning, 2010;Narula and GuimÏ n, 2010;Kayam and Hisarciklilar, 2009;Fonseca et al, 2007;Galan et al, 2007;Barry et al, 2003;Narula and Dunning, 2000;Buckley and Castro, 1998;Dunning, 1981), and not divestment as our study does.…”

“…In addition, there are some attempts to further improve the IDP context. So, Dunning et al (2013) incorporate trade aspects into the IDP suggesting that there is a certain interface between the IDP and the trade development path (TDP), especially in created asset-intensive industries. Further, Narula and GuimÏ n (2010) propose that IDP analysis should also take into account the idiosyncratic economic structure of countries and the heterogeneous nature of FDI emphasizing the turning points in a country's IDP.…”

Outward FDI and the Economic Performance of Emerging Markets

“…In Dunning's terms, the relationship between OFDI and IFDI indicates the degree to which a country has developed the market and institutional capabilities to attract sophisticated forms of IFDI (L-advantages), and the degree to which these advantages spillover to domestic firms who then invest abroad (Oadvantages). In subsequent work, Dunning et al (2001) have extended the framework to encompass trade.…”

“…The strong complementarity among OFDI, IFDI and trade has been emphasized by Dunning (1981) and Dunning et al (2001) in the various versions of the Investment Development Path (IDP). Although the direction of causality is not unambiguous, the IDP studies consistently indicate that economic development is associated with high levels of trade and FDI.…”

Poland’s Position on the Investment Development Path

“…In the initial stages of economic development, it is based mainly on raw materials, natural and low-processed products. Economic development is accompanied by changes in the structure of exports, which tend to be dominated by highly processed, capital-intensive and innovative products (Dunning, Kim and Lin, 2001).…”