ABSTRACT
The main argument of this book is that a firm’s FDI is determined by two sets of phenomena. Firstly, the objective conditions of profitability for capital as largely determined by factor prices. That is, labour-intensive firms in a country which is losing comparative advantage, will relocate to a country which is gaining comparative advantage in the same industry. Secondly, the subjective motivation of firms for FDI as influenced by state policies and firms’ desire to invest in places other than the existing location or domestic economy. It is concluded that there is a “special correspondence” between a country s comparative advantage and outward direct investment on the one hand, and the international division of labour between the investing and the recipient countries on the other. By special correspondence I mean the interrelationship between a country’s factor costs in international division of labour and outward direct investment.
