Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review. Issue 1 (February 2018)

• Record Type: Journal Article
• Authors: Bailey, Nicholas
• Is Part Of: International business review. Volume 27:Issue 1(2018:Feb.)
• Page Start: 139
• Page End: 148
• Publication Date: 2018-02
• Subjects: Foreign direct investment -- FDI attractiveness -- Institutions -- Institutional environment -- Location choice -- Meta-analysis; International business enterprises -- Periodicals; 338.8805
• DOI: 10.1016/j.ibusrev.2017.05.012
• Languages: English
• ISSNs: 0969-5931

Abstract

Highlights: Prior results on how institutional factors affect FDI attractiveness have been inconsistent. Using meta-analysis, we find that certain institutional factors do attract or deter FDI. Several environmental, methodological and other factors moderate the strength and/or significance of the relationship. Significant heterogeneity in the effect sizes suggests further contextualization is needed. Abstract: This meta-analysis attempts to synthesize and review decades of research on the relationship between institutional factors and host country foreign direct investment (FDI) attractiveness. Using prior tests derived from 97 primary studies, we find support for prior theoretical predictions that institutional factors such as political stability, democracy, and rule of law attract FDI, while others such as corruption, tax rates and cultural distance deter it. Further evidence suggests a need for exploration of moderating factors that may influence previous key findings. Specifically, environmental effects such as level of development, region of destination, and competitive industry environment have varying influence on the strength and significance of the relationship. We also explore a number of methodological and economic moderating variables, providing additional interesting insights into previous empirical analyses. We conclude with suggestions for future research that stress a call for further contextualization of the relationship.