| Abstract: | This article explores the relationship between foreign capital investment and trade dependence in less developed economies. Dependency and world system theorists have argued that foreign investment from the advanced capitalist states promotes export and import dependent forms of development. Using cross-national data for 65 less developed nations between 1960 and 1977, the analysis supports this general claim. Total direct foreign investment has a significant positive impact on the measures of export, import and total trade dependence. However, when the total foreign investment measure is disaggregated by sectoral destination (agriculture, manufacturing, petroleum/extraction) only investment in petroleum/extraction has the expected effect on trade dependence. This finding suggests that a large part of the effect of foreign investment may be due to the structuring influence of investment in mineral/extractive forms of production. |
