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Does Public Governance always Matter? How Experience of Poor Institutional Quality Influences FDI to the South

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  • Julia Darby
  • Rodolphe Desbordes
  • Ian Wooton

Abstract

This paper investigates whether the higher prevalence of South multinational enterprises (MNEs) in risky developing countries may be explained by the experience that they have acquired of poor institutional quality at home. We confirm the intuition provided by our analytical model by empirically showing that the positive impact of good public governance on foreign direct investment (FDI) in a given host country is moderated significantly, and even in some cases eliminated, when MNEs have been faced with poor institutional quality at home.

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File URL: http://www.cesifo-group.de/portal/page/portal/DocBase_Content/WP/WP-CESifo_Working_Papers/wp-cesifo-2010/wp-cesifo-2010-12/cesifo1_wp3290.pdf
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Paper provided by CESifo Group Munich in its series CESifo Working Paper Series with number 3290.

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Date of creation: 2010
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Handle: RePEc:ces:ceswps:_3290

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Keywords: South-South FDI; public governance; institutions;

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References

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  1. Agnès Bénassy-Quéré & Maylis Coupet & Thierry Mayer, 2005. "Institutional Determinants of Foreign Direct Investment," Working Papers, CEPII research center 2005-05, CEPII research center.
  2. Shang-Jin Wei, 1997. "How Taxing is Corruption on International Investors?," William Davidson Institute Working Papers Series, William Davidson Institute at the University of Michigan 63, William Davidson Institute at the University of Michigan.
  3. Head, Keith & Ries, John, 2008. "FDI as an outcome of the market for corporate control: Theory and evidence," Journal of International Economics, Elsevier, Elsevier, vol. 74(1), pages 2-20, January.
  4. Andrew K. Rose, 2004. "Do We Really Know That the WTO Increases Trade?," American Economic Review, American Economic Association, American Economic Association, vol. 94(1), pages 98-114, March.
  5. Desbordes, Rodolphe & Azémar, Céline, 2008. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2008-23, Scottish Institute for Research in Economics (SIRE).
  6. Bergstrand, Jeffrey H. & Egger, Peter, 2007. "A knowledge-and-physical-capital model of international trade flows, foreign direct investment, and multinational enterprises," Journal of International Economics, Elsevier, Elsevier, vol. 73(2), pages 278-308, November.
  7. Scott L. Baier & Gerald P. Dwyer & Robert Tamura, 2006. "How Important are Capital and Total Factor Productivity for Economic Growth?," Economic Inquiry, Western Economic Association International, Western Economic Association International, vol. 44(1), pages 23-49, January.
  8. Levon Barseghyan, 2008. "Entry costs and cross-country differences in productivity and output," Journal of Economic Growth, Springer, Springer, vol. 13(2), pages 145-167, June.
  9. Bruce A. Blonigen & Ronald B. Davies & Glen R. Waddell & Helen T. Naughton, 2004. "FDI in Space: Spatial Autoregressive Relationships in Foreign Direct Investment," NBER Working Papers 10939, National Bureau of Economic Research, Inc.
  10. Steven Globerman & Daniel Shapiro, 2004. "Governance Infrastructure and U.S. Foreign Direct Investment," International Finance, EconWPA 0404008, EconWPA.
  11. Céline Azémar & Rodolphe Desbordes, 2009. "Public Governance, Health and Foreign Direct Investment in Sub-Saharan Africa," Journal of African Economies, Centre for the Study of African Economies (CSAE), Centre for the Study of African Economies (CSAE), vol. 18(4), pages 667-709, August.
  12. Alsan, Marcella & Bloom, David E. & Canning, David, 2006. "The effect of population health on foreign direct investment inflows to low- and middle-income countries," World Development, Elsevier, Elsevier, vol. 34(4), pages 613-630, April.
  13. Stock, James H & Wright, Jonathan H & Yogo, Motohiro, 2002. "A Survey of Weak Instruments and Weak Identification in Generalized Method of Moments," Journal of Business & Economic Statistics, American Statistical Association, American Statistical Association, vol. 20(4), pages 518-29, October.
  14. Alvaro Cuervo-Cazurra & Mehmet Genc, 2008. "Transforming disadvantages into advantages: developing-country MNEs in the least developed countries," Journal of International Business Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 39(6), pages 957-979, September.
  15. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521677530.
  16. Caves,Richard E., 2007. "Multinational Enterprise and Economic Analysis," Cambridge Books, Cambridge University Press, Cambridge University Press, number 9780521860130.
  17. Thierry Mayer & Soledad Zignago, 2011. "Notes on CEPII’s distances measures: The GeoDist database," Working Papers, CEPII research center 2011-25, CEPII research center.
  18. Desbordes, Rodolphe, 2007. "The sensitivity of U.S. multinational enterprises to political and macroeconomic uncertainty: A sectoral analysis," International Business Review, Elsevier, Elsevier, vol. 16(6), pages 732-750, December.
  19. Globerman, Steven & Shapiro, Daniel, 2002. "Global Foreign Direct Investment Flows: The Role of Governance Infrastructure," World Development, Elsevier, Elsevier, vol. 30(11), pages 1899-1919, November.
  20. Alvaro Cuervo-Cazurra, 2006. "Who cares about corruption?," Journal of International Business Studies, Palgrave Macmillan, Palgrave Macmillan, vol. 37(6), pages 807-822, November.
  21. Christian Daude & Ernesto Stein, 2007. "The Quality Of Institutions And Foreign Direct Investment," Economics and Politics, Wiley Blackwell, Wiley Blackwell, vol. 19(3), pages 317-344, November.
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Citations

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Cited by:
  1. Mariya Aleksynska & Olena Havrylchyk, 2011. "FDI from the South: the Role of Institutional Distance and Natural Resources," Working Papers, CEPII research center 2011-05, CEPII research center.
  2. Rodolphe Desbordes & Julia Darby & Ian Wooton, 2011. "Institutional Quality and FDI to the South: An Analytical Approach," Working Papers, University of Strathclyde Business School, Department of Economics 11-31, University of Strathclyde Business School, Department of Economics.
  3. Celine Azemar & Julia Darby & Rodolphe Desbordes & Ian Wooton, 2012. "Market familiarity and the location of South and North MNEs," Working Papers, Business School - Economics, University of Glasgow 2012_05, Business School - Economics, University of Glasgow.
  4. Montfort Mlachila & Misa Takebe, 2011. "FDI from BRICs to LICs," IMF Working Papers, International Monetary Fund 11/178, International Monetary Fund.
  5. Desbordes, Rodolphe & Darby, Julia & Wooton, Ian, 2011. "Institutional Quality and FDI to the South An Analytical Approach," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2011-70, Scottish Institute for Research in Economics (SIRE).
  6. Yongzheng Yang, 2011. "Global Rebalancing," IMF Working Papers, International Monetary Fund 11/239, International Monetary Fund.
  7. Peter Nunnenkamp & Maximiliano Sosa Andrés & Krishna Chaitanya Vadlamannati & Andreas Waldkirch, 2012. "What Drives India’s Outward FDI?," Kiel Working Papers, Kiel Institute for the World Economy 1800, Kiel Institute for the World Economy.
  8. Azemar, Celine & Darby, Julia & Desbordes, Rodolphe & Wooton, Ian, 2012. "Market Familiarity and the Location of South and North MNEs," SIRE Discussion Papers, Scottish Institute for Research in Economics (SIRE) 2012-15, Scottish Institute for Research in Economics (SIRE).

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