Outward FDI and the investment development path of a late-industrializing economy:: Evidence from Ireland

The Investment Development Path (IDP) hypothesis holds that a country's net outward direct investment position is systematically related to its level of economic development. Ireland is an interesting test case because of the importance of inward foreign direct investment (FDI) over the last three decades and the recent increase in outward FDI by Irish-owned multinationals. We find empirical support for the IDP concept for the Irish case. Our sectoral analysis suggests that Ireland's outward FDI flows are disproportionately horizontal and oriented towards non-internationally-tradable sectors. Also, the firm-specific assets of Irish multinationals lie neither in R&D nor in the type of product differentiation associated with high advertising expenditures.