Transnational Corporations, vol. 7, no.1 (April 1998) 1 The investment development path: the case of Portugal Peter J. Buckley and Francisco B. Castro * This article develops the idea of an investment development path, which relates net foreign direct investment to per capita income, for Portugal. A novel form of relationship between investment and development is proposed, based on empirical evidence for 1943-1996. This is supported by an analysis of Portuguese conditions, which suggest that the investment development path is substantially influenced not only by government policy but also by external political events, such as Portugal’s accession to the European Economic Community, European Union integration and the fall of the Berlin wall, the latter bringing Central and Eastern European countries to the fore as locational competitors for inward investment. Introduction The idea of an “investment development path” (IDP) was introduced by John H. Dunning (1981a) as a dynamic approach within the paradigm of ownership, locational and internalization advantages (OLI). 1 The IDP hypothesizes an association between a country’s level of development (proxied by GDP per capita) and its international * The authors are, respectively, Professor, Leeds University Business School, Leeds, United Kingdom; and Researcher, Leeds University Business School, Leeds, United Kingdom, and Lecturer, Faculdade de Economia do Porto, Porto, Portugal. This research was partially financed by Programa Praxis XXI. The authors would like to thank Paulo Sousa (Faculdade de Economia do Porto) and two anonymous referees for their suggestions on an earlier version of the paper. 1 Dunning (1981a: p.134, footnote 13; 1981b: p.30, footnote) describes the genesis of the investment development cycle as follows: it was first presented in 1975 by him and Peter J. Buckley at a conference of the United Kingdom Chapter of the Academy of International Business, and again in 1978 with Buckley and Robert D. Pearce at a similar conference.