Institutional Quality and Foreign Direct Investment: Global Evidence

Hayat Khan (), Ying Dong, Robeena Bibi and Itbar Khan ()
Additional contact information
Hayat Khan: Zhejiang University of Science and Technology
Ying Dong: Zhejiang University of Science and Technology
Robeena Bibi: Hohai University
Itbar Khan: Shenzhen University

Journal of the Knowledge Economy, 2024, vol. 15, issue 3, No 24, 10547-10591

Abstract: Abstract Institutional quality and good governance are considered important in attracting foreign direct investment (FDI) to determine the role of the institutional quality and governance as an incentive for FDI inflow. It is arbitrary to link institutions and economic growth as attractive indicators of FDI inflow in different countries. This study uses a two-step system GMM model and examines the impact of institutional quality on FDI in the global panel, developed, developing, and Asian countries from 2002 to 2019. The results suggest that only regulatory quality significantly increases FDI inflow while other institutional indicators along the institutional quality index are negatively associated with FDI inflow in the global panel. In case of developed countries, control of corruption and regulatory quality negatively affect FDI inflow while all other indicators have no effect on FDI inflow. In case of developing countries, control of corruption, political stability, and voice and accountability significantly attract FDI inflow, while government effectiveness, regulatory quality, political system, and institutional quality index significantly reduce FDI inflow. In case of Asian countries, all institutional quality indicators have a significant and positive effect on FDI inflows, except the control of corruption, which reduces FDI inflow. The results of this study have significant policy implications for the countries in the sample in the context of institutional quality indicators and FDI inflow.

Keywords: Institutional quality; Political system; Legal system; FDI inflow; Two-step GMM (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s13132-023-01508-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:jknowl:v:15:y:2024:i:3:d:10.1007_s13132-023-01508-1

Ordering information: This journal article can be ordered from
http://www.springer.com/economics/journal/13132

DOI: 10.1007/s13132-023-01508-1

Access Statistics for this article

Journal of the Knowledge Economy is currently edited by Elias G. Carayannis

More articles in Journal of the Knowledge Economy from Springer, Portland International Center for Management of Engineering and Technology (PICMET)
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().