There are several critical macroeconomic determinants of FDI outflow such as the
income of a country (Kyrkilis and Pantelidis, 2003; Wu et al., 2003). In term of the
income, the economic structure of a country will experience modification along with
the growth of the income. Subsequently, country will move towards capital-intensive
industry and has the capability to increase production despite become more efficient.
This is due to the effect of economies of scale and adoption of new technologies
(Chenery et al., 1986). This will lead to the potential of establishing production
abroad due to the gaining of ownership advantage (Lall, 1980; Grubaugh, 1987).
Meanwhile, the well-known concept of Investment Development Path (IDP)
introduced by Dunning (1981) provides essential point associating income and FDI
outflow. IDP consists of five degree of FDI expansion – Level 1: Almost nonexistence
of outward FDI; Level 2: Low pace of inward and outward FDI growth rate;
Level 3: Gradual expansion of inward and outward FDI; Level 4: Expansion of
outward FDI surpasses inward FDI; Level 5: Expansion of outward and inward FDI
resume. IDP indicates linkages between net FDI outflows and varies stages of
development of a country, measured by income of a country. This framework further
postulated that higher income is link to higher level of FDI outflows.