Institutional quality, financial development and OFDI

Abstract

Using a panel of 73 countries from 2000 to 2008, this study uses Investment Development Path theory as a framework that utilises institutional quality (IQ) as a threshold for the effect of economic development on OFDI. Using the dynamic threshold model, we find new evidence that the strong promoting effect is initiated when IQ is within a certain interval, which is supplementary to IDP theory. Finally, we propose the corresponding advice.