The Investment Development Path theory: Evidence from developing countries’ agricultural sector

Abstract

Background: We examined the investment development path (IDP) through the perspective of developing countries’ agricultural sector. Our analytical approach indirectly accounts for interactions among countries regarding cross-border resource transfers. Aside from providing knowledge on testing the IDP by inferential statistics, the information would be relevant for policymaking. Identifying the stage(s) in the IDP not only highlights the global appeal of agriculture but also guides firms seeking to expand beyond borders. This information is essential for developing an effective economic strategy. Methods: We employed data from 1991 to 2021 for 55 countries from the Food and Agriculture Organization Corporate Statistical Database (FAOSTAT) and applied a fixed effects estimator corrected for serial correlation and non-constant variances. Results and conclusions: We found that agriculture in developing countries is currently in stages I and II of the IDP. Broadly, agricultural production requires policies that would increase outward foreign direct investment and inward foreign direct investment. Domestic agricultural businesses in developing countries must develop capacity by learning from foreign multinationals. This would enable agricultural businesses to invest abroad. Such a move would lead to an increase in outward FDI. As this would have resulted from increased GDP per capita, it will lead to movement from the existing stage to higher ones.