Free trade zones' evolutionary development: A progressive step-wise process paradigm model referential to investment promotion zones of Sri Lanka

This research contributes to the understanding of the evolutionary development processes of Free Trade Zones (FTZs) and their impact on the economic and industrial development of small developing countries. An increasing number of developing countries consider FTZs as important instruments of their development policy to augment foreign investment, export growth and employment of surplus labor. As production and labor costs increase, many manufacturing firms from more developed countries locate and invest in plants in developing countries, with the expectation of increasing profits through increased efficiency in production, specialization and international trade.;The objective of this research focused on finding theoretical explanations for the evolutionary development process of behavioral patterns of successful FTZs in small developing countries, especially those explanations that are relevant to the performance and growth of Investment Promotion Zones (IPZs) of Sri Lanka. Several methodologies were employed to test the multi-level hypotheses of the step-wise progression of the evolutionary development of FTZs. A model was developed to describe the growth process of an FTZ identified in six stages, each stage with its distinct attributes.;The results of the analysis of a particular case study revealed that the contributions of Sri Lankan IPZs to the nation's growth was significant only in the specialized garment industry. The implications of these results will extend existing knowledge of spatial-temporal economic development processes, theory and policy. The research also adds to data on similar comparative case studies and generalized FTZ theory, and the multivariate analysis employed here contributes to geo-economic development theory and methodology.