Effect of quality of institutions on outward foreign direct investment

Mishra, Anil and Daly, Kevin (2007) Effect of quality of institutions on outward foreign direct investment. The Journal of International Trade and Economic Development, 16 (2). pp. 231-244. ISSN 0963-8199

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In this paper we study the effect of quality of institutions in the OECD and Asian host countries on outward foreign direct investment (FDI) stocks of source OECD countries using International Country Risk Guide governance indicators, for the period 1991 to 2001. We find that better institutions in the host countries have an overall positive and significant effect on source countries outward FDI stocks. The strength and impartiality of the legal system, popular observance of law, strength and quality of bureaucracy and government stability in host countries’ have direct effect on source countries outward FDI stocks. Interestingly, trade changes sign and losses significance in two stage least squares regressions compared to theoretical expectation. Furthermore skill proxied by labour abundance in source countries relative to host countries appears to be insignificant in determining source countries’ outward FDI stock.

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Item Type: Article (Commonwealth Reporting Category C)
Refereed: Yes
Item Status: Live Archive
Additional Information: Author's final manuscript deposited in accordance with the copyright policy of the publisher.
Faculty / Department / School: Historic - Faculty of Business - School of Accounting, Economics and Finance
Date Deposited: 11 Oct 2007 00:58
Last Modified: 02 Jul 2013 22:42
Uncontrolled Keywords: foreign direct investment; governance indicators; financial institutions
Fields of Research : 15 Commerce, Management, Tourism and Services > 1502 Banking, Finance and Investment > 150205 Investment and Risk Management
14 Economics > 1402 Applied Economics > 140210 International Economics and International Finance
15 Commerce, Management, Tourism and Services > 1501 Accounting, Auditing and Accountability > 150102 Auditing and Accountability
Socio-Economic Objective: B Economic Development > 91 Economic Framework > 9101 Macroeconomics > 910109 Savings and Investments
Identification Number or DOI: 10.1080/09638190701325573
URI: http://eprints.usq.edu.au/id/eprint/2175

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