Journal Press India®

An Empirical Testing of Investment Development Path Theory in the Indian Context

Vol 9 , Issue 2 , July - December 2022 | Pages: 20-41 | Research Paper  

Article has been added to the cart.View Cart (0)

Author Details ( * ) denotes Corresponding author

1. * Arushi Malhotra, Assistant Professor, Commerce, Shri Ram College of Commerce, Delhi, Delhi, India (

There has been a substantiated rise in the FDI flows (both inward and outward) across the globe since the 1990s. The most remarkable fact about the global FDI flows is that the share of developing countries in total FDI is continuously rising. India, being one of those important developing countries, has also seen a surge in both inward and outward FDI flows. The present study uses Dunning's investment development path (IDP) paradigm as a theoretical framework to examine long-term developments in India's inward and outward FDI. Its primary goal is to assess how far the country has progressed along its IDP. The study has analysed the annual time series data from 1991 onwards using the quadratic specification model as proposed by Dunning. The analysis indicates that India has reached the stage 3 of the IDP, with a few notable exceptions, the assessed IDP trajectory is in accordance with Dunning's model.


Investment Development Path; Inward Foreign Direct Investment; Outward Foreign Direct Investment; Gross Domestic Product; India

  1. Asiamah, M., Ofori, D., & Afful, J. (2019). Analysis of the determinants of foreign direct investment in Ghana. Journal of Asian Business and Economic Studies, 26(1), 56-75.
  2. Barry, F., Gorg, H., & McDowell, A. (2003). Outward FDI and the investment development path in a late-industrialising economy: Evidence from Ireland. Regional Studies, 37(4), 341-349.
  3. Bellak, C. (2000). The Austrian investment development path. Transnational Corporations, 10(2), 107-134.
  4. Boudier-Bensebaa, F. (2008). FDI-assisted development in the light of the investment development path paradigm: Evidence from Central and Eastern European countries. Transnational Corporations, 17(1), 37–67.
  5. Buckley, P. J., & Castro, F. B. (1998). The investment development path: The case of Portugal. Transnational Corporations, 7(1), 1–15.
  6. Dunning, J. H. (1977). Trade, location of economic activity and the MNE: A search for an eclectic approach. In: Ohlin, B., Hesselborn, P. O., & Wijkman, P. M., Eds., The International Allocation of Economic Activity. London: MacMillan
  7. Dunning, J. H. (1980). Toward an eclectic theory of international production: Some empirical tests. Journal of International Business Studies, 11(1), 9-31.
  8. Dunning, J. H. (1981). Explaining the international direct investment position of countries: Towards a dynamic or development approach. Weltwirtschaftliches Archiv, 117, 30-64.
  9. Dunning, J. H. (1986). The investment development cycle revisited. Weltwirtshaftliches Archiv, 122, 667-677.
  10. Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of International Business Studies, 19, 1-32.
  11. Dunning, J. H. (1993). Multinational enterprises and the global economy. Workingham, England: Addison-Wesley Publishing Company.
  12. Dunning, J. H., & Narula, R. (1996). Foreign direct investment and governments: Catalysts for economic restructuring. London: Routledge.
  13. Duran, J. J., & Ubeda, F. (2001). The investment development path: A new empirical approach and some theoretical issues. Transnational Corporations, 10(2), 1-34.
  14. Fonseca, M., Mendonca, A., & Passos, J. (2007). The investment development path hypothesis: Evidence from the portuguese case -a panel data analysis. Working Papers Department of Economics 2007/21, ISEG - School of Economics and Management, Department of Economics, University of Lisbon.
  15. Gorynia, M., Nowak, J., & Wolniak, R. (2010). Foreign direct investment in Central and Eastern Europe: The IDP trajectories of selected countries. Pozna’n University of Economics Review, 10(1), 5–26.
  16. Gorynia, M., Nowak, J., & Wolniak, R. (2007). Poland and its investment development path. Eastern European Economics, 45(2), 52-74.
  17. Narula, R., & Guimon, J. (2010). The investment development path in a globalised world: Implications for Eastern Europe. Eastern Journal of European Studies, 1(2), 5–19.
  18. Narula, R., & Dunning, J. H. (2010). Multinational enterprises, development, and globalisation: Some clarifications and a research agenda. Oxford Development Studies, 38(3), 263-287.
  19. Pichl, C. (1989). Economic Development and Foreign Investment Linkages. WIFO Monatsberichte (monthly reports), 62,259-266
  20. Scott-Kennel, J., & Enderwick, P. (2005). FDI and interfirm linkages: Exploring the black box of the IDP. Transnational Corporations, 14(1), 105-130.
  21. Vavilov, S. (2006). Investment Development Path in Petroleum Exporters. Working Paper, University of Paris I Panthéon – Sorbonne,43, Pantheon-Sorbonne University
  22. Verma, R., & Brennan, L. (2011). The investment development path theory: Evidence from India. International Journal of Emerging Markets, 6(1), 74-89.
Abstract Views: 18
PDF Views: 1

By continuing to use this website, you consent to the use of cookies in accordance with our Cookie Policy.