| Foreign direct investment can stimulate emerging economies with capital for economic growth. As an emerging economy grows, it begins generating its own outward foreign direct investments. The relationship between the economic growth of emerging economies and the development of foreign direct investments is described by Dunning's investment development path theory. The problem that this study addressed is that Dunning's theory does not provide an objective scale relating the level of economic development to a corresponding level of investment development. The purpose of this study was to create a scale that related the value of gross domestic product with specific stages of Dunning's theory. This quantitative study introduced a new variable, DeltaOFDI / DeltaIFDI, representing a ratio of the change in outward investment to the change in inward investment. A regression analysis of economic data from official world sources indicated that DeltaOFDI / DeltaIFDI was a significant predictor of economic growth, beta = .102, t(76) = 3.69, p < .001. A Wilcoxon rank-sum test revealed that the economic growth predicted by this variable at one investment stage was significantly different than the value at the next investment stage, W = 145, p = .009. The variable DeltaOFDI / DeltaIFDI was a sufficient indicator of Dunning investment stage II, but care must be taken to distinguish between the onset of FDI growth and the onset of FDI reporting. The onset of FDI reporting can be identified using Student's t for the first five years of reported data. The empirically-derived values of gross domestic product provide an objective scale relating economic development to investment development stages. Recommendations for future research include investigating the nature of the regional difference for Sub-Saharan Africa IDP stage II transitions. |
