Foreign Investment as a Dependent Variable: Determinants of Foreign Investment and Capital Penetration in Developing Nations, 1967-1978

Abstract

While foreign investment and capital penetration have become key predictor variables in many studies of economic development and social change, much less scrutiny has been applied to these phenomena as outcomes of intranational characteristics. In this crossnational, quantitative study of the determinants of growth of foreign investment and capital penetration, the growth of both phenomena is found to be similar and can be partially explained by common models based on the logic of market orientation. Moreover, such phenomena as foreign capital penetration in manufacturing and overurbanization are positively related to this growth, suggesting that previous research has misspecified certain relationships and that certain elements of the dependent- development approach to dependency theory require refinement or modification.