IDEAS home Printed from
   My bibliography  Save this article

Government Policies, Market Imperfections, and Foreign Direct Investment


  • Thomas L Brewer

    (Georgetown University)


The internalization/eclectic theory of foreign direct investment includes the important insight that government policies create market imperfections, which make foreign direct investment an economically rational strategic alternative for firms. This paper reexamines the effects of government policies on market imperfections and foreign direct investment (FDI). It broadens and refines the analysis of the impact of government policies by developing the following arguments: (1) There is a wide range of government policies that affect firms′ FDI decisions via their effects on market imperfections. (2) There are numerous dimensions of variability in government policies that need to be identified in order to understand fully the effects of government policies on market imperfections and hence FDI flows. (3) Some of the effects of government policies on market imperfections and FDI are the opposite of those previously noted in the FDI literature. (4) The effects of government policies vary across the several individual components of FDI flows. The paper thus examines the following variables and relationships more extensively and precisely than has the previous literature: government policy variables as causal factors affecting FDI; market imperfection variables as intervening factors in the causal connections between government policies and FDI; and the multiple indicators of the various dimensions of FDI as dependent variables.© 1993 JIBS. Journal of International Business Studies (1993) 24, 101–120

Suggested Citation

  • Thomas L Brewer, 1993. "Government Policies, Market Imperfections, and Foreign Direct Investment," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 24(1), pages 101-120, March.
  • Handle: RePEc:pal:jintbs:v:24:y:1993:i:1:p:101-120

    Download full text from publisher

    File URL:
    File Function: Link to full text PDF
    Download Restriction: Access to full text is restricted to subscribers.

    File URL:
    File Function: Link to full text HTML
    Download Restriction: Access to full text is restricted to subscribers.

    As the access to this document is restricted, you may want to search for a different version of it.

    More about this item


    Access and download statistics


    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pal:jintbs:v:24:y:1993:i:1:p:101-120. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Sonal Shukla) or (Rebekah McClure). General contact details of provider: .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.