Institutional environment features and Swiss foreign direct investment

An interdisciplinary literature suggests that institutional environment features are significant determinants in the location of foreign direct investment. Weak institutional environment features are considered to have a negative effect on capital inflows. Conversely, empirical studies have found that investors locate in host countries providing high rates of return despite weak institutional environment features. Switzerland is home to some of the most important global investors and one of Europe's largest global investors. Swiss foreign direct investment is an interesting case to examine since it has been nurtured in a well-established institutional environment. In this paper, we evaluate Swiss foreign direct investment located in 56 countries over the period 2005-2009 using statistical and machine learning techniques. From our analysis two models emerge suggesting that Swiss investment favours countries with high political stability and high accountability. However, we also find that Swiss investment does not necessarily discriminate against countries with weak institutional environments.