A Transition Economy and Outward Direct Foreign Investment

Abstract

This paper aims at explaining outward direct foreign investment (DFI) from a country in transition from the developing to the developed status. Such a country is losing a comparative advantage in labor-intensive industries but gaining it in capital and knowledge-intensive industries, and its pattern of outward DFI is related to this change in comparative advantage. Empirical support for the relationship is provided with data from Korea, a prime example of an economy in transition.