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Political Risk as a Determinant of Southern European FDI in Neighboring Developing Countries

  • Alfredo Jiménez
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    This study analyzes foreign direct investment flows from southern European countries to one of two nearby developing regions: north African countries and new European Union member states in central and eastern Europe. As expected, good economic perspectives, human capital, and development of infrastructures attract greater investment flows. However, greater levels of political risk, measured through scales of political discretion, corruption, and economic freedom, do also attract higher inflows. Despite the fact that one might expect global flows to fall as a consequence of political risk, those from the countries in the sample increase, because they come from firms that are searching for a market niche where they can take advantage of their political capabilities.

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    Article provided by M.E. Sharpe, Inc. in its journal Emerging Markets Finance and Trade.

    Volume (Year): 47 (2011)
    Issue (Month): 4 (July)
    Pages: 59-74

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    Handle: RePEc:mes:emfitr:v:47:y:2011:i:4:p:59-74
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