Abstract:Although Investment Development Path (IDP) theory had pointed out that, the net OFDI of a country would develop from negative to positive with the development of the economy. However, the dynamic mechanism and influencing factors of this process have not yet been revealed clearly. Based on the real practice of openness and development of typical developing countries, such as China and Brazil, we build up an efficient framework to investigate the dynamic mechanism of IDP at the industry level. By the comparison between the development of auto industry in China and Brazil, we have discovered that, the dynamic process from attracting inward FDI to conducting outward FDI in a country is a result of the efficient interaction among the trend of global industry, the specific industry conditions, as well as the development of local firms, especially with the intelligent guidance of host country’s government.

Authors: Taotao Chen, Xiao Chen, Lingjun Gu, Shichang Liu.

Working paper, submitted to The Academy of International Business 2018 Annual Meeting.