Foreign investment location and institutional development in transition economies
By A. Bevan, Saul Estrin, K. Meyer. Multinational Enterprises and Emerging Economies, 2004
260 citations recorded by the source corpus.
Institutions are widely regarded as a crucial locational advantage of host countries aiming to attract foreign investors. However, there is little agreement on which institutions matter, and why. This study contributes to filling this gap by analyzing the impact of different dimensions of the newly created institutional framework in East European transition economies on foreign direct investment (FDI). Using a dataset detailing FDI flows from individual market economies to transition ones, we examine the relationship between institutional development and FDI inflow. We find that FDI is positively related to the quality of formal institutions, though an impact from informal institutions can only be shown for the special case of Russia, which has suffered from a gap between the extensiveness and effectiveness of legal reform. Several specific formal institutions are found to influence FDI: private ownership of business, banking sector reform, foreign exchange and trade liberalization, and legal development. Conversely, domestic price liberalization, non-bank financial sector development and competition policy do not enhance FDI. These results point to important complementarities, but also potential conflicts, between policy reform and the interest of multinational firms.
Subfields: Accounting, Economics and Econometrics, Strategy and Management
View Paper: https://www.semanticscholar.org/paper/cc41d8c776267c22a84734c15bd0e4a9f7e16aef
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Citations in the corpus
- Institutions, Resources, and Entry Strategies in Emerging Economies (2020, unknown): “The strengthening of the institutional framework thus lowers costs of doing business (Estrin, 2002; Bengoa and Sanchez-Robles, 2003; Bevan, Estrin, and Meyer, 2004) and influences foreign entrants’ mode decisions by moderating the costs of alternative organizational forms (Williamson, 1985).”
- The impact of institutional quality on foreign direct investment inflows: evidence for developed and developing countries (2018, methodology): “The control variables Pop and Lagged F.D.I. positively and significantly affect F.D.I. inflows, while Tele, Financial Crises, and W.T.O. have negative and insignificant effects on F.D.I. inflows.”
- Determinants of FDI in developed and developing countries: a quantitative analysis using GMM (2018, background): “Institutional factors have a rich collection of inter-reliant structures and systems within a country (Bevan et al., 2004; Asiedu, 2006; Henisz and Swaminathan, 2008).”