Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries

Root, Franklin R.

doi:10.1086/451139

Cited by 254 publications

(139 citation statements)

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“…For Noorbakhsh et al (2001), human capital is not only one the most important determinants but its importance has become greater through time. But others authors found the effects to be statistically insignificant (Root and Ahmed, 1979;Schneider and Frey, 1985;Cheng and Kwan, 2000;and Quazi, 2007). For Guntlach (1995), appud in Agiomirgianakis et al (2006:7), this can be explained by the fact that education "creates externalities and spill-over effects in production, which are hard to be captured using standard sets of variables of human capital accumulation".…”

Section: Determinants Of Fdi and Corruptionmentioning

confidence: 94%

Does corruption inhibit foreign direct investment?

Castro

Nunes²

2013

Revista Política

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Globalization creates new opportunities for firms to invest abroad and many economies are making active efforts to attract Foreign Direct Investment (FDI) in order to promote economic growth. Decisions to invest abroad depend on a complex set of factors, but the least corrupt countries may attract more foreign direct investment because they provide a more favorable climate for investors. In this paper we investigate the impact of corruption on FDI inflows in 73 countries, over the period 1998-2008. Our results suggest that countries where corruption is lower, the FDI inflows are greater, and so controlling corruption may be an important strategy for increase FDI inflows. Keywords: Corruption, Foreign Direct Investment, economic growth. ¿La corrupción inhibe La inversión extranjera Directa?La globalización ha creado nuevas oportunidades para invertir en el extranjero y muchas economías están haciendo esfuerzos para atraer inversión extranjera directa (IED) con el fin de promover el crecimiento económico. La decisión de invertir en el extranjero depende de un complejo conjunto de factores. No obstante, los países menos corruptos pueden atraer más inversión extranjera directa, ya que proporcionan un clima más favorable para los inversionistas. En este trabajo se investiga el impacto de la corrupción sobre los flujos de IED en 73 países, en el período 1998-2008. Los resultados sugieren que los países donde la corrupción es menor, las entradas de IED son mayores, por lo que el control de la corrupción puede ser una estrategia importante para aumentar los flujos de IED. Palabras clave: corrupción, Inversión extranjera directa, crecimiento económico.

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Section: Determinants Of Fdi and Corruptionmentioning

confidence: 94%

Does corruption inhibit foreign direct investment?

Castro

Nunes²

2013

Revista Política

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“…While the economic and political factors are found to be significant to attract inbound FDI in various studies (Baniak, Cukrowski & Herczynski, 2005;Ok, 2004), Root and Ahmed (1979) investigated the significance of 38 variables which are categorized into 3 groups described as economic, social, and political variables. Thus, the model formulated to investigate the determinants of inbound FDI can be written as:…”

Section: Methodsmentioning

confidence: 99%

“…Firstly, to capture the market size the study uses the natural log of real GDP per capita (constant 2000 US$) to measure the current market size and real GDP growth to measure the potential market size (see Root & Ahmed, 1979). It is believed that the larger the market size, the more potential investment environment to be invested by a market-seeking MNEs.…”

Section: Fdi = F [(Economic Variables) (Social Variables) (Politicamentioning

confidence: 99%

Bilateral Investment Treaties, Political Risk and Foreign Direct Investment

Kim

2007

SSRN Journal

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The study constructs a linear model to evaluate the significant impacts of bilateral investment treaties (BITs) on foreign direct investment (FDI) and the possible consequences of BITs. The results show that BITs have significantly promoted FDI, and their effects are substitute for the level of political risk in a country. Another interesting finding is that BITs signed with non-OECD countries should not be overlooked. By estimating the growth of FDI resulting from an additional BIT ratified, the finding further indicates that BITs are more potential for most Asian countries to promote FDI.On average, a BIT ratified by a country in South, East, and South-East Asia can raise FDI by around 2.3 percent.

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“…GDP or GNI per capita control for the host country's level of development and other dimensions of institutional quality that are not captured by the ICRG indices. Absolute GNI instead of GNI per capita is used in the literature to capture market size (e.g., Asiedu, 2006;Chakrabarti, 2001;Root and Ahmed, 1979). Market size is generally expected to have a positive impact on FDI, as larger market size implies greater demand and this size advantage attracts more market-seeking foreign investment.…”

Section: Additional Control Variablesmentioning

confidence: 99%

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

Akhtaruzzaman

Berg

Hajzler

2017

European Journal of Political Economy

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. ii Terms of use: Documents in EconStor may AbstractPreviously reported effects of institutional quality and political risks on foreign direct investment (FDI) are mixed and, therefore, difficult to interpret. We present empirical evidence suggesting a relatively clear, statistically robust, and intuitive characterization. Institutional factors that affect the likelihood of an abrupt and total loss of foreigners' capital (i.e., return of capital) dominate those that affect rates of return conditional on a strictly positive terminal investment value (i.e., return on capital). A one-standarddeviation reduction in expropriation risk is associated with a 72 per cent increase in FDI, which is substantially larger than the effects of any other dimensions of institutional quality simultaneously controlled for in our empirical models of FDI inflows. This evidence is consistent with the predictions of a standard theory of FDI under imperfect contract enforcement. We show in the context of a simple model with endogenous expropriation that, when there is a binding threat of expropriation, foreign investors can become unresponsive to differences in other dimensions of institutions and political risk, and may even reduce optimal investment as these institutions improve. Bank topics: Development economics, International financial markets JEL codes: D23, F21, F23 RésuméLes effets signalés antérieurement qu'exercent la qualité des institutions et les risques politiques sur l'investissement direct étranger (IDE) sont contrastés et, par conséquent, difficiles à interpréter. Nous présentons des données empiriques qui font ressortir une caractérisation intuitive statistiquement solide. Les facteurs institutionnels ayant une incidence sur la probabilité d'une perte soudaine et totale du capital détenu par des étrangers (remboursement de capital) l'emportent sur ceux touchant les taux de rendement subordonnés à une valeur nue finale strictement positive (rendement du capital investi). Une réduction de un écart-type du risque d'expropriation est associée à une augmentation de 72 % de l'IDE, une hausse nettement supérieure à celles engendrées par n'importe quels autres aspects de la qualité des institutions pris en compte simultanément dans nos modèles empiriques d'entrées d'IDE. Ce résultat cadre avec les prédictions d'une théorie classique de l'IDE où l'exécution des contrats est imparfaite. Dans un modèle simple intégrant un facteur d'expropriation endogène, nous démontrons qu...

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Empirical Determinants of Manufacturing Direct Foreign Investment in Developing Countries

Cited by 254 publications

References 7 publications

Does corruption inhibit foreign direct investment?

Does corruption inhibit foreign direct investment?

Bilateral Investment Treaties, Political Risk and Foreign Direct Investment

Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?

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