Foreign Direct Investment, Industrialization, and Social Change

Abstract

Indicators of the changes in social structure which result from the industrialization of traditional societies are developed via factor analysis of data from 59 developing countries. Multiple regression is then used to investigate the relationship between industrialization, social change, and the relative economic importance of foreign direct investment. The relationship is found to be interactive; foreign direct investment intensifies the pressures for changes in social structure produced by industrialization. The paper concludes that this finding is inconsistent with a theory of underdevelopment in which integration into the world capitalist system inhibits, or even prevents, broadscale industrialization. Rather it requires a transformation of the concept of dependence which recognizes the possibility of capitalist industrialization through foreign investment.