Governance infrastructure and FDI flows in developing countries

Abstract

With the existence and management of certain national and global-level institutions being called into question by their electorates and members, the aim of this paper based on a sample of 122 countries over the period 2002–2017 was to investigate the continuing applicability and relevance of current and existing macro governance infrastructure on patterns of foreign direct investment (FDI) in developing countries. Employing the World Bank’s ‘good governance index’ our findings demonstrate that certain aspects of country – level governance infrastructure continue to be a significant predictor of host country FDI, with particular emphasis placed on the ability of governments to effectively formulate and implement policies alongside an effective regulatory environment promoting private sector development. Thus, countries with weak institutional capacity to design and implement an effective investment regime, and secondly absorb FDI will struggle to attract and benefit from the positive externalities associated with FDI.

Keywords:

• Governance
• institutions
• FDI
• developing countries
• determinants
• empirical

Disclosure statement

No potential conflict of interest was reported by the author.

Additional information

Notes on contributors

Andrew G. Ross

Dr. Ross is a tenured lecturer in international business within the School of Management at Edinburgh Napier University. Prior to this appointment he taught economics at The University of Edinburgh, and worked within the corporate division of a leading global bank. He has previously published articles in the fields of corporate governance, regional entrepreneurship, and foreign direct investment. His current research focus is on the international business environment, and the impact institutions and governance mechanisms have on country level foreign direct investment. Dr. Ross currently serves as an Associate Editor for the journal Corporate Governance, is a Senior Fellow of the Higher Education Academy, and a Fellow of the Royal Geographical Society.