Foreign direct investment and institutions: A case of Indian firms

Munmi Saikia

The Journal of International Trade & Economic Development, 2021, vol. 30, issue 5, 725-738

Abstract: The present study examines the effect of institutions on the location choice of foreign direct investment (FDI) using a novel dataset for bilateral FDI of India. My study follows prior works to argue that institutions have a positive association with FDI. The study considers three widely used institutional pillars namely state judiciary system, bureaucracy system, and property right protection to examine the effect of institutions on location choice of FDI. The study extends prior works focusing on the influence of firms’ heterogeneity on the connection between institutions and FDI using the gravity model. The study finds that institutions have a significant and positive impact on the location choice of FDI. The results reveal that institution of developed regions is positively associated with FDI. But surprisingly, there is a negative association between institutions of the developing region and FDI. I put the firms into four separate bins according to their size to capture the firms’ heterogeneity. Results show that large-sized firms are more likely to invest in countries with good institutions.

Date: 2021
References: Add references at CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://hdl.handle.net/10.1080/09638199.2021.1894217 (text/html)
Access to full text is restricted to subscribers.

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:taf:jitecd:v:30:y:2021:i:5:p:725-738

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/RJTE20

DOI: 10.1080/09638199.2021.1894217

Access Statistics for this article

The Journal of International Trade & Economic Development is currently edited by Pasquale Sgro, David E.A. Giles and Charles van Marrewijk

More articles in The Journal of International Trade & Economic Development from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().