HCBE Faculty Articles

Title

Formal Institutions and Foreign Direct Investment

Document Type

Article

Date

2009

Publication Title

Thunderbird International Business Review

ISSN or ISBN

1520-6874

Volume

51

Issue

2

First Page

165

Last Page

183

Description

This study examines the impact of formal institutions on foreign direct investment. First, the quality (strength or weakness) of formal institutions in host countries is analyzed. Second, the absolute differences in the quality of formal institutions between the host and home countries are examined. The results show that (1) strong formal institutions in host countries positively influence FDI flows and (2) the larger the institutional distance between the home and host country, the lesser the FDI inflows.

DOI

10.1002/tie.20256

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