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Political culture and foreign direct investment: The case of Italy


  • Ram Mudambi
  • Pietro Navarra


Does the political culture of an area have any impact on the foreign direct investment (FDI) decisions of multinational corporations (MNCs)? This question is difficult to address empirically, as locations differ in many dimensions. We therefore address this question by examining MNC investment location decisions with regard to different regions within a single country. The country we examine is Italy, which exhibits one of the highest levels of variation with regard to the political culture of its geographical regions. We find that political culture as represented by the pattern of support for political parties at different points on the political spectrum has a significant impact on the MNC investment location decision. Thus, in choosing between locations on a short list, where economic and financial location factors are roughly similar, political culture can have a determining influence. In the case of Italy, a Center-right orientation is conducive to MNC FDI, while a Center-left orientation is not. A Far-left orientation is found to have a very negative effect on FDI. Copyright Springer-Verlag Berlin Heidelberg 2003

Suggested Citation

  • Ram Mudambi & Pietro Navarra, 2003. "Political culture and foreign direct investment: The case of Italy," Economics of Governance, Springer, vol. 4(1), pages 37-56, April.
  • Handle: RePEc:spr:ecogov:v:4:y:2003:i:1:p:37-56
    DOI: 10.1007/s101010100031

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    Cited by:

    1. repec:bla:jomstd:v:54:y:2017:i:4:p:403-421 is not listed on IDEAS
    2. Alain Verbeke & Liena Kano, 2013. "The transaction cost economics (TCE) theory of trading favors," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 409-431, June.
    3. repec:bla:presci:v:96:y:2017:i:2:p:299-323 is not listed on IDEAS
    4. Jasmine Mondolo, 2018. "How do informal institutions influence inward FDI? A systematic review," "Marco Fanno" Working Papers 0218, Dipartimento di Scienze Economiche "Marco Fanno".
    5. Mary Teagarden & Andreas Schotter, 2013. "Favor prevalence in emerging markets: A multi-level analysis," Asia Pacific Journal of Management, Springer, vol. 30(2), pages 447-460, June.
    6. Fofana Mory Fodé, 2014. "The Influence of Measures of Economic Freedom on FDI: A Comparison of Western Europe and Sub-Saharan Africa," Global Economy Journal, De Gruyter, vol. 14(3-4), pages 1-26, October.

    More about this item


    Key words: Foreign direct investment; political culture; MNCs; JEL Classification Numbers: F23; D72; D73;

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • D72 - Microeconomics - - Analysis of Collective Decision-Making - - - Political Processes: Rent-seeking, Lobbying, Elections, Legislatures, and Voting Behavior
    • D73 - Microeconomics - - Analysis of Collective Decision-Making - - - Bureaucracy; Administrative Processes in Public Organizations; Corruption


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