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

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  • Darby, Julia
  • Desbordes, Rodolphe
  • Wooton, Ian

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 intuitions 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 or reversed, when MNEs have had prior experience of poor institutional quality at home. In contrast, MNEs with little experience are deterred much more by bad public governance conditions than could have been inferred from an unconditional estimation of the effects of public governance on FDI.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 7533.

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Date of creation: Nov 2009
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Handle: RePEc:cpr:ceprdp:7533

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Keywords: Institutions; Public governance; South-South FDI;

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References

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Citations

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Cited by:
  1. Rodolphe Desbordes & Julia Darby & Ian Wooton, 2011. "Institutional Quality and FDI to the South: An Analytical Approach," Working Papers 11-31, University of Strathclyde Business School, Department of Economics.
  2. Celine Azemar & Julia Darby & Rodolphe Desbordes & Ian Wooton, 2012. "Market Familiarity and the Location of South and North MNEs," Economics and Politics, Wiley Blackwell, vol. 24(3), pages 307-345, November.
  3. Montfort Mlachila & Misa Takebe, 2011. "FDI from BRICs to LICs: Emerging Growth Driver?," IMF Working Papers 11/178, International Monetary Fund.
  4. Peter Nunnenkamp & Maximiliano Sosa Andrés & Krishna Chaitanya Vadlamannati & Andreas Waldkirch, 2012. "What Drives India’s Outward FDI?," Kiel Working Papers 1800, Kiel Institute for the World Economy.
  5. Yongzheng Yang, 2011. "Global Rebalancing: Implications for Low-Income Countries," IMF Working Papers 11/239, International Monetary Fund.

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