Climbing the economic ladder: the role of outward foreign direct investment

This paper argues that, under certain conditions, outward foreign direct investment (FDI) can promote economic development in the home economies from which the investment originates. It presents a conceptual framework incorporating simultaneously the complex interrelationships between the three main tenets shaping the developmental outcomes of outward FDI - the home economy conditions that induce firms to invest abroad; the role of the state in linking outward investment to economic development back in the home economy; and the investment returns which stimulate catching-up. The framework helps researchers and policymakers assess particular characteristics of outward FDI and their impacts on the home economies.