Determinants of firms' investment behaviour: A multilevel approach
AbstractThis paper investigates micro and macro determinants of firms' investment behaviour using firm data from 101 developing and emerging economies. A substantial number of firms in our sample does not invest in fixed capital or invests little relative to sales revenue. Using a multilevel probit model we study what factors trigger investment and using a multilevel Heckman selection model we study what factors influence a firm's investment to sales ratio. Although we find that both micro and macro determinants explain investment behaviour, firms' investment behaviour is heterogeneous in nature and has little dependency on a country's macroeconomic setting. In addition, we find that, on average, firms which are completely foreign owned have a relatively lower investment to sales ratio. Finally, we find evidence which suggests that the probability of investing is higher for firms located in countries with more property rights protection and control of corruption and we find some evidence which suggests that foreign owned firms located in countries with `good' institutions invest relatively more.
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Bibliographic InfoPaper provided by United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT) in its series MERIT Working Papers with number 055.
Date of creation: 2013
Date of revision:
Multilevel; Investment; Foreign ownership; Institutions;
Find related papers by JEL classification:
- E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Capital; Investment; Capacity
- F20 - International Economics - - International Factor Movements and International Business - - - General
- O11 - Economic Development, Technological Change, and Growth - - Economic Development - - - Macroeconomic Analyses of Economic Development
- O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development
- O43 - Economic Development, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth
This paper has been announced in the following NEP Reports:
- NEP-ALL-2013-11-29 (All new papers)
- NEP-BEC-2013-11-29 (Business Economics)
- NEP-INT-2013-11-29 (International Trade)
- NEP-MAC-2013-11-29 (Macroeconomics)
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