Does the World Still Follow the Investment Development Path? Testing the Validity of the Model

This study investigates the validity of the Investment Development Path model. The analysis of the original theoretical framework, as well as several extensions, is conducted with a use of fixed effects panel dataset. Obtained results lead to the conclusion that the IDP model still correctly predicts the relationship between the Net Outward Investment position of a country and its level of development, however it faces difficulties in capturing the consequences of the Global Financial Crisis. Several interesting deviations of countries from their expected IDPs are presented. The study puts some light on the limitations of the IDP framework and provides insights for a future research in this field.