Investment Promotion and FDI Inflows: Quality Matters
AbstractInformation asymmetries constitute a significant obstacle to capital flows across international borders, and in particular to flows of foreign direct investment (FDI) to emerging markets. Many governments aim to reduce information barriers by engaging in investment promotion activities. Despite potentially large benefits of FDI and popularity of investment promotion intermediaries (IPIs), relatively little is known about their effectiveness. This study uses data collected through the Global Investment Promotion Benchmarking (GIPB) exercise to examine whether higher quality of IPI services translates into higher FDI inflows. The analysis, based on information on 156 countries, suggests that countries with IPIs able to handle investor inquiries in a more professional manner and IPIs possessing higher quality Web sites tend to attract greater volume of FDI. These results are robust to using sector-level data and instrumental variable approach. (JEL codes: F21, F23, H11) Copyright The Author 2012. Published by Oxford University Press on behalf of Ifo Institute, Munich. All rights reserved. For permissions, please email: email@example.com, Oxford University Press.
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Volume (Year): 59 (2013)
Issue (Month): 2 (June)
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Other versions of this item:
- Torfinn Harding & Beata Javorcik, 2012. "Investment Promotion and FDI Inflows: Quality Matters," Economics Series Working Papers 612, University of Oxford, Department of Economics.
- F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- H11 - Public Economics - - Structure and Scope of Government - - - Structure and Scope of Government
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