International Journal of Economics and Business Research · 2009 · 64 citations · 28 references
BusinessInternational BusinessForeign Direct InvestmentInternational EconomicsInternational FinanceFdi DeterminantsInstitutional EnvironmentInternational Capital FlowsInvestment PolicyForeign Direct Investment AnalysisForeign Direct Investment InflowsForeign Direct Investment OutflowsInstitutional Determinants Of InvestmentPolicy Mix DesignStrong Institutions
Western governments and international financial institutions have urged developing countries to implement institutional reforms to attract investment and accelerate development. This study investigates whether emerging economies with stronger governing institutions and business‑friendly policies attract proportionally more foreign direct investment than those with weaker institutions. Using data on FDI inflows for 64 emerging economies, the authors review prior literature, formulate hypotheses, and test them with a new institutional quality measure through statistical analysis. The analyses show that higher institutional quality is associated with increased FDI inflows, supporting the policy implication that strengthening institutions can boost investment, and the study outlines avenues for future research.
In recent years, Western governments and international financial institutions have urged developing countries to undertake a range of institutional reforms to attract greater investment flows and hasten socioeconomic development. But do countries with strong governing institutions and business-friendly policies truly attract proportionally more foreign direct investment (FDI) than those with weaker institutions and a less favourable policy mix? This study seeks to answer this question by examining data on FDI inflows for a sample of 64 emerging economies over time. The article begins by reviewing the literature on the determinants of FDI and recent empirical studies probing the connection between governing institutions and FDI flows to emerging economies. Based on this literature, several hypotheses are developed and tested with a new measure of institutional quality. The article concludes by interpreting the results of the statistical analyses, considering their policy implications, and offering directions for future research.
28