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The effect of competition policy on FDI location decision: an empirical investigation using data on inward FDI in 38 countries

Author

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  • Jihad Ait Soussane

    (Ibn Tofail University- Kenitra-Morocco)

  • Zahra Mansouri

    (Ibn Tofail University- Kenitra-Morocco)

Abstract

The present paper investigates the effect of competition policy and market regulation on foreign direct investment's (FDI) location choice. The central research hypothesis considers the Product-Market Regulation (PMR) indicator as a determinant of FDI location decisions. The empirical analysis uses cross-sectional data on the stock of inward FDI in 38 countries and the Robust Weighted Least Squares (RWLS) estimation method, which the results show that the more the market regulation is anti-competition in the host country, the less the latter receives FDI. The implications of the results are highly relevant for the host country's policymakers because pro-competition policies are needed to attract inward foreign direct investment. In particular, Policymakers should liberalize investment and trade, lower tariffs and barriers to entry, limit the involvement of the State in the market regarding price control and other regulatory tools, and simplify the regulatory framework for foreign investors.

Suggested Citation

  • Jihad Ait Soussane & Zahra Mansouri, 2023. "The effect of competition policy on FDI location decision: an empirical investigation using data on inward FDI in 38 countries," Economia e Politica Industriale: Journal of Industrial and Business Economics, Springer;Associazione Amici di Economia e Politica Industriale, vol. 50(2), pages 243-263, June.
    • Handle: RePEc:spr:epolin:v:50:y:2023:i:2:d:10.1007_s40812-022-00252-y
    DOI: 10.1007/s40812-022-00252-y
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    References listed on IDEAS

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    More about this item

    Keywords

    Foreign direct investment; Multinational enterprises; Competition policy; Product market regulation; Robust least squares;
    All these keywords.

    JEL classification:

    • C31 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Cross-Sectional Models; Spatial Models; Treatment Effect Models; Quantile Regressions; Social Interaction Models
    • 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
    • K20 - Law and Economics - - Regulation and Business Law - - - General
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation

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