The Investment development path theory: Evidence from developing countries' agricultural sector

Area of Science:

• Agricultural Economics
• International Development
• Economic Growth Theory

Background:

• The Investment Development Path (IDP) framework is analyzed within the context of developing nations' agricultural sectors.
• Cross-border resource transfers and international interactions are indirectly considered in the analytical approach.
• Understanding the IDP is crucial for evidence-based policymaking and strategic economic planning.

Purpose of the Study:

• To investigate the current stage of the Investment Development Path (IDP) for the agricultural sector in developing countries.
• To provide insights for policymakers and firms regarding international agricultural investment and expansion.
• To identify strategies for advancing developing countries' agricultural sectors along the IDP.

Main Methods:

• Utilized data spanning 1991-2021 from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT).
• Included a sample of 55 developing countries.
• Employed a fixed effects estimator, with corrections for serial correlation and non-constant variances.

Main Results:

• The agricultural sectors of developing countries are predominantly situated in stages I and II of the IDP.
• Increased outward and inward foreign direct investment (FDI) is necessary for agricultural growth.
• Domestic firms can enhance capacity by learning from multinational corporations, fostering outward FDI and economic advancement.

Conclusions:

• Developing countries' agricultural sectors require policies to stimulate both inward and outward foreign direct investment (FDI).
• Capacity building through engagement with foreign multinationals is key for domestic agricultural businesses to invest internationally.
• Successful outward FDI, driven by increased GDP per capita, facilitates progression to higher stages of the IDP.