scholarly journals Impact of Institutional Quality on Foreign Direct Investment Inflow: Evidence from Croatia

2020 ◽  
Vol 11 (1) ◽  
pp. 44-58
Author(s):  
Ljubo Jurčić ◽  
Sanja Franc ◽  
Antea Barišić
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Institutional Quality ◽  
Political Stability ◽  
Economic Cycle ◽  
Economic Determinants ◽  
Institutional Determinants ◽  
Per Capita ◽  
And Control ◽  
Determinants Of Fdi

AbstractBackground: Foreign direct investment (FDI) flows are unevenly distributed around the world and determined by different factors. The literature points out to economic and non-economic determinants of FDI flows, while the latter have shown to generate ambiguous effects across regions.Objectives: The primary goal of this paper is to examine the relationship between non-economic determinants and the FDI inflow in Croatia from 1996 to 2017, thus capturing different periods of the economic cycle. The importance of non-economic institutional determinants of FDI is analysed in parallel with the economic determinants.Methods/Approach: This study uses available data on FDI per capita and a set of non-economic (institutional) and economic determinants. We employed the OLS regression analysis to determine the significance of FDI inflow determinants and compare the relevance of non-economic to economic factors.Results: Results of this exploratory study show that institutional quality variables included in the model (regulatory quality, political stability, and government effectiveness, the rule of law and control of corruption) could not be pointed out as important determinants of the FDI inflow in Croatia. Economic variables GDP per capita and average gross wage prove to be important in determining the FDI inflow in Croatia.Conclusions: The research results point to a variety of FDI determinants among countries and economic cycle periods. Given the evidence from Croatia, variations, especially in institutional determinants, might be caused by the diverse FDI inflow characteristics and specificities of receiving economies.

scholarly journals Increasing Supply of Tradable Goods in the Common Market for Eastern and Southern Africa (COMESA)

2015 ◽  
Vol 1 (2) ◽  
pp. 73-117
Author(s):  
Macleans Mzumara
Keyword(s):  
Foreign Direct Investment ◽  
Rule Of Law ◽  
Direct Investment ◽  
Institutional Quality ◽  
Political Stability ◽  
Government Effectiveness ◽  
Regulatory Quality ◽  
Tradable Goods ◽  
And Control ◽  
Control Of Corruption

The author investigated the nature of institutional quality in the Common Market for Eastern and Southern Africa (COMESA) on the basis of voice and accountability political stability, government effectiveness, regulatory quality, rule of law and control of corruption. The author further investigated the existence of a link between institutional quality and factors of production. The results show that capital, entrepreneurship and foreign direct investment are the major determinants of production of tradable goods in COMESA. In exception of Mauritius and Namibia (currently no longer a member) the rest of COMESA member states have very poor institutional quality. This affects their ability to attract foreign direct investment hence production of tradable goods. Voice and accountability, government effectiveness, rule of law and political stability play a major role in increasing production of tradable goods in COMESA. Foreign direct investment is affected by voice and accountability, rule of law and political stability than any other factors. Availability of raw material is affected by government effectiveness, regulatory quality, political stability, voice and accountability and control of corruption. Capital is very sensitive to issues of voice and accountability and control of corruption and regulatory quality.

Institutional determinants of foreign direct investment inflows: evidence from emerging markets

2019 ◽  
Vol 15 (2) ◽  
pp. 245-261 ◽  
Author(s):  
Justin Paul ◽  
Pravin Jadhav
Keyword(s):  
Foreign Direct Investment ◽  
Emerging Markets ◽  
Direct Investment ◽  
Multinational Enterprises ◽  
Political Stability ◽  
Strategic Decision ◽  
Content Type ◽  
Institutional Determinants ◽  
Using Data ◽  
Determinants Of Fdi

Purpose Foreign direct investment (FDI) is a strategic decision for achieving competitive advantage by multinational enterprises. The purpose of this paper is to explore the role of institutional determinants of FDI using data from 24 emerging markets including China, India, Indonesia, Turkey, Thailand, Malaysia and Pakistan. Design/methodology/approach In order to identify factors that attract FDI in emerging markets, this study has used data from sources such as the World Bank, Index of Economic Freedom and UNCTAD. Findings The findings of this research indicate that infrastructure quality, trade cost measured by tariff and non-tariff barriers, institutional quality measured by effective rule of law, political stability, regulatory quality and control on corruption are significant determinants of FDI in emerging markets. Originality/value This is the first study to analyze the sectoral institutional determinants of Inward FDI in the important emerging economies, to the best of authors’ knowledge.

Institutional quality and foreign direct investment in Ghana

2020 ◽  
Vol 30 (1) ◽  
pp. 109-122 ◽  
Author(s):  
Ibrahim Nandom Yakubu
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Institutional Quality ◽  
Principal Component ◽  
Political Stability ◽  
Single Measure ◽  
Content Type ◽  
Distributed Lag ◽  
Long Run ◽  
The Impact

Purpose This paper aims to investigate the impact of institutional quality on foreign direct investment (FDI) in Ghana for the period 1985-2016. Design/methodology/approach The study uses the autoregressive distributed lag (ARDL) approach to examine the relationship between institutional quality along with other controlled variables and FDI. Findings Evidence from the ARDL framework establishes a positive significant effect of institutional quality on FDI irrespective of the time horizon. The results also reveal a significant impact of inflation on FDI in both short and long run, while GDP per capita growth and trade are significant determinants only in the short run. Practical implications The study recommends the instigation of effective policies and strategies that seek to strengthen the quality of institutions, as this provides a conducive investment climate to attract FDI. Specifically, policies that are focused on promoting transparent legal regimes, regulatory reforms, non-corrupt institutions and political stability should be the precedence of policymakers. Originality/value In addition to being a pioneering work on the impact of institutional quality on FDI in Ghana, the main contribution of the study lies in its application of the principal component analysis to generate a single measure of institutional quality based on a number of institutional factors.

scholarly journals ‎ The Influence of Human Development, Institutional Quality and ‎ISIS Emergence on Foreign Direct Investment in Iraq ‎

2020 ◽  
Vol 10 ◽  
pp. 318-332
Author(s):  
Zeravan Abdulmuhsen Asaad ◽  
Bayar MohamedRasheed Marane
Keyword(s):  
Foreign Direct Investment ◽  
Human Development ◽  
Direct Investment ◽  
Institutional Quality ◽  
Political Stability ◽  
Positive Sign ◽  
Islamic State ◽  
Fdi Inflows ◽  
Explanatory Variables ◽  
Governance Indicators

This study investigates the influence of human development and institutional quality on the foreign direct investment net inflows on the gross domestic product in Iraq for the period (2004-2016) by using OLS regression. The empirical results show that governance sub-indicators do not actually matter much in attracting Foreign Direct Investment (FDI) inflows in Iraq. This variable shows fixed results with a different sign; the Political Stability (PS), Government Effectiveness (GE) and Rule of Law (RL) are the sub-indicators of the governance with a positive sign which is insignificant, while the Voice and Accountability (VA), Regulatory Quality (RQ) and Control of Corruption (CC) are the sub-indicators of the governance index with a negative sign and an insignificant impact on FDI inflows. The value of Worldwide Governance Indicators (WGI) coefficient is negative and significant at 10% level. Hence it has been concluded that the explanatory variables are negatively associated with the dependent variable FDI. In contrast, the Human Development Index (HDI) has a positive and significant impact on FDI inflows. This study found that Islamic State of Iraq and Syria (ISIS) emergence after (2013) had a significant coefficient, meaning that ISIS has affected the level of FDI inflows.

scholarly journals The Economic Determinants of Foreign Direct Investment in Developing Countries and Transition Economies

2008 ◽  
Vol 47 (3) ◽  
pp. 285-299
Author(s):  
İSmail ÇEviŞ ◽  
Burak ÇAmurdan
Keyword(s):  
Developing Countries ◽  
Foreign Direct Investment ◽  
Panel Data ◽  
Transition Economies ◽  
Direct Investment ◽  
Inflation Rate ◽  
Host Countries ◽  
Fdi Inflows ◽  
Economic Determinants ◽  
Determinants Of Fdi

The economic growth rates have dramatically increased in developing economies, such as in Latin American, Asian, and Eastern European countries, following the financial liberalisation attempt, especially during the 1990s. Foreign direct investment (FDI) has become an increasingly important element for economic development and integration of developing countries and transition economies in this period with the world economy. The main purpose of this study is to develop an empirical framework to estimate the economic determinants of FDI inflows by employing a panel data set of 17 developing countries and transition economies for the period of 1989:01-2006:04. In our model there are seven explanatory economic variables. They are, respectively, the previous period FDI (the pull factor for new FDI), GDP growth (measures market size), Wage (unit labour costs), Trade Rate (measures the openness of countries), the real interest rates (measures macroeconomic policy), inflation rate (as country risk and macroeconomic policy), and domestic investment (Business Climate). Hence, throughout the paper, only the economic determinants (being separated and apart from the other studies in the literature) of FDI inflows to developing countries and transition economies are studied. It is found out that the previous period FDI which is directly related to the host countries’ economic resources is important as an economic determinant. Besides, it is also understood that the main determinants of FDI inflows are the inflation rate, the interest rate, the growth rate, and the trade (openness) rate and FDI inflows give power to the economies of host countries. JEL classification: F21, R19, C23 Keywords: Foreign Direct Investment, the Determinants of FDI, the Developing Countries, Transition Economies, Panel Data Analysis

scholarly journals Economic Determinants of Foreign Direct Investment in Less Developed Countries

1994 ◽  
Vol 33 (1) ◽  
pp. 41-51 ◽  
Author(s):  
Abul F. M. Shamsuddin
Keyword(s):  
Foreign Direct Investment ◽  
Host Country ◽  
Direct Investment ◽  
Market Size ◽  
Investment Climate ◽  
Economic Determinants ◽  
Wage Cost ◽  
Economic Instability ◽  
Public Aid ◽  
Per Capita

This study examines the economic determinants of private foreign direct investment (FDI) by using a single-equation econometric model for 36 LDCs for the year 1983. The market size of the host country as measured by per capita GDP is found to be the most important factor in attracting FDI. The other important variables which influence FDI are found to be the cost factor (such as wage cost) and the investment climate in the host country (represented by such variables as per capita debt). The inflow of per capita public aid and economic instability, proxied by the volatility of prices, are other important factors affecting the flow of FDI. While larger market size and increased inflow of public aid attract FDI, the higher wage cost, poor investment climate, and economic instability in the host countries reduce the inflow of FDI. The model used to obtain these results is found to be structurally stable across countries.

scholarly journals FINANCIAL REPORTING STANDARDS ADOPTION AND FOREIGN DIRECT INVESTMENT IN NIGERIA AS MODERATED BY INSTITUTIONAL QUALITY

2021 ◽  
Vol 4 (2) ◽  
pp. 66-92
Author(s):  
James Neminebor ◽  
◽  
Suleiman Aruwa ◽  
Keyword(s):  
Foreign Direct Investment ◽  
Financial Reporting ◽  
Direct Investment ◽  
Institutional Quality ◽  
Political Stability ◽  
International Financial Reporting Standards ◽  
Reporting Standards ◽  
Financial Reporting Standards ◽  
Ex Post ◽  
Ex Post Facto

The adoption of IFRS enhanced the transparency of stewardship reporting and thus improved the investment ability of countries affected. The study examined the moderating effect of institutional quality on the relationship between international financial reporting standards and foreign direct investment in Nigeria from 2012 to 2018 Institutional quality was measured by political stability and control of corruption while foreign direct investment was measured by foreign investment on equity, foreign portfolio investment on money market and foreign direct investment on trade credits. Ex-post facto research design was adopted and the Generalised Methods of Moments (GMM) was used for the analysis. The study found that with the aid of institutional quality, the IFRS has a significant effect on investment inflows in Nigeria. The study concludes that international financial reporting standards has a significant influence on foreign direct investment with strengthened institution and anticorruption efforts in Nigeria. Therefore, the study recommends that the Nigerian government should strengthen its institutional mechanisms to fully benefit from the adoption of IFRS and drive inflows of foreign direct investment.

scholarly journals The Evolving Framework of Determinants of Foreign Direct Investment: A Review of Literature

2018 ◽  
Vol 4 (02) ◽  
Author(s):  
Rahul Bhasin ◽  
K V Bhanu Murthy
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Developing Economies ◽  
New Technology ◽  
Trade Openness ◽  
Private Investment ◽  
Political Stability ◽  
Policy Makers ◽  
Managerial Skills ◽  
Determinants Of Fdi

The last two decades have witnessed intense competition among countries, particularly developing economies, to attract foreign direct investment (FDI). This is because FDI fills the gap between desired investment and domestic private investment and helps them to acquire new technology and managerial skills. This paper attempts to understand the evolution of FDI theory along with changes in the significance of determinants of FDI over a period of time. An analysis of the extant literature shows that factors such as market size and per capita incomes have remained important determinants of FDI decisions both traditionally as well as in contemporary times. However, some factors such as resources, trade openness and FDI openness have now become secondary factors influencing FDI. Other factors which were earlier secondary but have now gained prominence as FDI determinants are infrastructure; institutional factors such as corruption and political stability; and tax related variables. The above review provides us insights into the changing aspects of FDI decision-making and can provide useful inputs to policy makers regarding the areas which need focus for creating a congenial climate for FDI

scholarly journals TheRole of Institutional Determinants in Attracting Foreign Direct Investment to Egypt: Empirical Study

2020 ◽  
pp. 54-69
Keyword(s):  
Foreign Direct Investment ◽  
Direct Investment ◽  
Empirical Literature ◽  
Distributed Lag ◽  
Distributed Lag Model ◽  
Regulatory Quality ◽  
Institutional Determinants ◽  
Short Run ◽  
Lag Model ◽  
And Control

This paper aims to explore the relationship between foreign direct investment (FDI) in Egypt, as a dependent variable,and selectedeconomic and institutional determinants for the period (1996-2018). The work attempts to bridge the gap created by previous empirical literature that failed to focus on critical institutional determinantsof FDI in developing countries, especially governance-related determinants. The study used the autoregressive distributed lag model (ARDL); to testthe Cointegration relationship between FDI and its determinants.Besides, the error correction model (ECM) wasused to explorethe short-run relationship. In light ofapplying the ARDL approach, the study concluded that while both market size and regulatory quality stimulatedFDI, the latter has been negatively affected by the real exchange rate and government effectiveness. Moreover, the study revealed that inthe short-run, both regulatory quality and control of corruption inducedFDI in Egypt. These findings shed light on the crucial role that institutional factors can play in creating a more favorable FDI climate in Egypt.

scholarly journals Apakah Kualitas Institusi Berpengaruh pada Arus Masuk FDI di ASEAN?

2020 ◽  
Vol 20 (2) ◽  
pp. 146-159
Author(s):  
Ali Akbar Septiantoro ◽  
Heni Hasanah ◽  
Muhammad Findi Alexandi ◽  
Sri Retno Wahyu Nugraheni
Keyword(s):  
Foreign Direct Investment ◽  
Panel Data ◽  
Gross Domestic Product ◽  
Direct Investment ◽  
Institutional Quality ◽  
Political Stability ◽  
Capital Formation ◽  
Crowding Out ◽  
Government Effectiveness ◽  
Fixed Capital Formation

This paper examines the impact of institutional quality (government effectiveness index, voice and accountability index, and political stability) and economic variables (Gross Domestic Product [GDP], inflation, trade openness, and gross fixed capital formation) on Foreign Direct Investment (FDI) inflows in ASEAN 2012–2016 by using panel data analysis. The obtained results indicate that economics variables have a greater impact on FDI than political stability indicator. Our findings also suggest that insignificant effect of democracy and institutional quality indicator on FDI caused by the high level of corruption in ASEAN which maybe has a crowding out effect to level of democracy and institutional quality. ----------------------------------- Tujuan dari penelitian ini adalah untuk mengetahui pengaruh kualitas institusi (indeks government effectiveness, indeks voice and accountability, indeks stabilitas politik) dan variabel ekonomi lain (Gross Domestic Product [GDP], inflasi, keterbukaan perdagangan, dan gross fixed capital formation) terhadap Foreign Direct Investment (FDI) pada negara ASEAN periode tahun 2012–2016 dengan menggunakan analisis panel data. Hasil estimasi menunjukkan bahwa variabel ekonomi memiliki pengaruh yang lebih besar terhadap FDI dibandingkan dengan indikator stabilitas politik. Hasil kajian ini juga menemukan bahwa tidak signifikannya pengaruh indikator demokrasi dan kualitas institusi terhadap FDI dikarenakan tingginya tingkat korupsi yang mungkin memiliki efek crowding out terhadap tingkat demokrasi dan kualitas institusi.

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