ABSTRACT
This chapter describes the link between the two theories in the developed and developing economic blocs. Regionalised Foreign direct investment (FDI) is a strategic response of firms coping with changes in relative competitiveness, locational advantages and organisational forms brought about through the realignment of tariffs, increase in market size and market growth after the formation of a Customs Unions (CUs). The level of FDI into a region, as well as its distribution will consequently be affected by the type of strategy pursued, and by other factors which affect the strategies in their own capacities. Regionalism creates additional locational attractions to the CU market and makes potential rents to be realised from ownership advantages of investors. The enlargement of internal market brought about by regionalism may bring economic advantages besides those of more efficient allocation of production and consumption between countries on the basis of costs of production of commodities before its formation.
