IDEAS home Printed from https://ideas.repec.org/a/wly/povpop/v4y2012i3p49-57.html

Institutional and Political Determinants of Foreign Direct Investment: Evidence From BRICS Economies

Author

Listed:
  • Pravin Jadhav
  • Vijaya Katti

Abstract

This paper explores the role of institutional and political factors in attracting foreign direct investment (FDI) in the economies of Brazil, Russia, India, China, and South Africa (BRICS) and the comparative importance of these factors in attracting FDI. This study uses panel data for a period of 10 years (2000–2010) in order to examine the significant determinants of FDI in BRICS from a holistic approach. Analysis has been done using the panel unit‐root test and multiple regressions. This study takes into account Macroeconomic Stability (Inflation Rate), Political Stability/No Violence, Government Effectiveness, Regulatory Quality, Control of Corruption, Voice and Accountability, and Rule of Law as potential institutional and political determinants of FDI. These factors are based on their relative importance from previous empirical literature. The overall results show that two factors, namely Government Effectiveness and Regulatory Quality, are positively related to FDI inflow in BRICS. Three variables in the model, namely Political Stability, Voice and Accountability, and Control of Corruption, have a negative impact on FDI inflow in BRICS economies, which implies that these three factors are not important for attracting more FDI inflow.

Suggested Citation

  • Pravin Jadhav & Vijaya Katti, 2012. "Institutional and Political Determinants of Foreign Direct Investment: Evidence From BRICS Economies," Poverty & Public Policy, John Wiley & Sons, vol. 4(3), pages 49-57, September.
    • Handle: RePEc:wly:povpop:v:4:y:2012:i:3:p:49-57
    DOI: 10.1002/pop4.5
    as

    Download full text from publisher

    File URL: https://doi.org/10.1002/pop4.5
    Download Restriction: no
    File URL: https://libkey.io/10.1002/pop4.5?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    References listed on IDEAS

    as
    1. Dani Rodrik & Arvind Subramanian & Francesco Trebbi, 2004. "Institutions Rule: The Primacy of Institutions Over Geography and Integration in Economic Development," Journal of Economic Growth, Springer, vol. 9(2), pages 131-165, June.
    2. Shang-Jin Wei, 2000. "How Taxing is Corruption on International Investors?," The Review of Economics and Statistics, MIT Press, vol. 82(1), pages 1-11, February.
    3. Elizabeth Asiedu, 2006. "Foreign Direct Investment in Africa: The Role of Natural Resources, Market Size, Government Policy, Institutions and Political Instability," The World Economy, Wiley Blackwell, vol. 29(1), pages 63-77, January.
    4. World Bank, 2003. "Trade, Investment and Development in the Middle East and North Africa : Engaging with the World," World Bank Publications - Books, The World Bank Group, number 15116, April.
    5. W. A. Naude & W. F. Krugell, 2007. "Investigating geography and institutions as determinants of foreign direct investment in Africa using panel data," Applied Economics, Taylor & Francis Journals, vol. 39(10), pages 1223-1233.
    6. Sufian Eltayeb Mohamed & Moise G. Sidiropoulos, 2010. "Another Look At The Determinants Of Foreign Direct Investment In Mena Countries: An Empirical Investigation," Journal of Economic Development, Chung-Ang Unviersity, Department of Economics, vol. 35(2), pages 75-95, June.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Kaffo Fotio, Hervé & Karim, Abdoul, 2024. "Unravelling the impact of political risk on industrialization: Evidence from Africa," International Economics, Elsevier, vol. 179(C).
    2. Sarker, Bibhuti & Serieux, John, 2023. "Multilevel determinants of FDI: A regional comparative analysis," Economic Systems, Elsevier, vol. 47(3).
    3. Imran Ali, Imran & Foday, Foday & Zahid Usman, Muhammad, 2024. "Determinants of Foreign Direct Investment in India: A VECM Analysis of Economic Indicators," MPRA Paper 122185, University Library of Munich, Germany, revised 03 Sep 2024.
    4. Ghulam Mustafa, 2023. "The Dynamic Relationship Between Financial Development, Economic Growth, Foreign Direct Investment and Trade Openness: Evidence from South Asian Countries," Millennial Asia, , vol. 14(3), pages 406-433, September.
    5. Evangelia Vasilarou & Michel Zouboulakis, 2023. "Institutionalist impact upon the efficiency of public finance policy. A theoretical approach," Economics Bulletin, AccessEcon, vol. 43(3), pages 1338-1355.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Aleksynska, Mariya & Havrylchyk, Olena, 2013. "FDI from the south: The role of institutional distance and natural resources," European Journal of Political Economy, Elsevier, vol. 29(C), pages 38-53.
    2. Aziz, Omar Ghazy, 2018. "Institutional quality and FDI inflows in Arab economies," Finance Research Letters, Elsevier, vol. 25(C), pages 111-123.
    3. Doytch, Nadia & Elheddad, Mohamed & Perez-Sebastian, Fidel, 2025. "New climate policy, resource abundance, and sectoral FDI," Energy Economics, Elsevier, vol. 145(C).
    4. Federico Carril-Caccia & Juliette Milgram-Baleix & Jordi Paniagua, 2019. "Foreign Direct Investment in oil-abundant countries: The role of institutions," PLOS ONE, Public Library of Science, vol. 14(4), pages 1-23, April.
    5. Mina, Wasseem, 2012. "Beyond FDI: The Influence of Bilateral Investment Treaties on Debt," MPRA Paper 51920, University Library of Munich, Germany.
    6. Bambe, Bao-We-Wal & Ouedraogo, Adama, 2025. "Public expenditure efficiency and foreign direct investment in developing countries," IDOS Discussion Papers 16/2025, German Institute of Development and Sustainability (IDOS).
    7. John Anyanwu, 2011. "Working Paper 136 - Determinants of Foreign Direct Investment Inflows to Africa, 1980-2007," Working Paper Series 327, African Development Bank.
    8. Grivas Chiyaba & Carl Singleton, 2022. "Do natural resources and FDI tend to erode or support the development of national institutions?," Economics Discussion Papers em-dp2022-02, Department of Economics, University of Reading, revised 30 May 2023.
    9. Akhtaruzzaman, M. & Berg, Nathan & Hajzler, Christopher, 2017. "Expropriation risk and FDI in developing countries: Does return of capital dominate return on capital?," European Journal of Political Economy, Elsevier, vol. 49(C), pages 84-107.
    10. Mina, Wasseem Michel, 2012. "The Institutional Reforms Debate and FDI Flows to the MENA Region: The “Best” Ensemble," World Development, Elsevier, vol. 40(9), pages 1798-1809.
    11. Bailey, Nicholas, 2018. "Exploring the relationship between institutional factors and FDI attractiveness: A meta-analytic review," International Business Review, Elsevier, vol. 27(1), pages 139-148.
    12. Cong Minh Huynh & Vu Hong Thai Nguyen & Hoang Bao Nguyen & Phuc Canh Nguyen, 2020. "One-way effect or multiple-way causality: foreign direct investment, institutional quality and shadow economy?," International Economics and Economic Policy, Springer, vol. 17(1), pages 219-239, February.
    13. Kimiagari, Salman & Mahbobi, Mohammad & Toolsee, Tushika, 2023. "Attracting and retaining FDI: Africa gas and oil sector," Resources Policy, Elsevier, vol. 80(C).
    14. Wasseem MIchel Mina, 2010. "Institutional Reforms Debate and FDI Flows to MENA Region: Does One “Best” Fit All?," International Center for Public Policy Working Paper Series, at AYSPS, GSU paper1034, International Center for Public Policy, Andrew Young School of Policy Studies, Georgia State University.
    15. Komlan Fiodendji & Kodjo Evlo, 2015. "Do Institutions Quality Affect FDI Inflows in Sub-Saharan African Countries?," Journal of Applied Finance & Banking, SCIENPRESS Ltd, vol. 5(1), pages 1-8.
    16. Mulugeta Kahsai & Yohannes Hailu & Chali Nondo & Peter Schaeffer, 2011. "The Role of Institutional Quality in FDI Inflows in Sub-Saharan Africa," Working Papers Working Paper 2011-03, Regional Research Institute, West Virginia University.
    17. Jaworek, Małgorzata & Karaszewski, Włodzimierz & Szałucka, Małgorzata, 2021. "Ownership-Based Entry Mode Strategies and Limiting Factors of Foreign Direct Investment Undertaken by Polish Enterprises," Journal of East European Management Studies, Nomos Verlagsgesellschaft mbH & Co. KG, vol. 26(3), pages 440-468.
    18. Anirudh Shingal & Maximiliano Mendez‐Parra, 2024. "African continental free trade area and greenfield investment: Likely effect and transmission channels," The World Economy, Wiley Blackwell, vol. 47(8), pages 3364-3393, August.
    19. Zaiter Lahimer, Mahjouba, 2011. "L’impact des entrées de capitaux privés sur la croissance économique dans les pays en développement," Economics Thesis from University Paris Dauphine, Paris Dauphine University, number 123456789/7670 edited by Sterdyniak, Henri.
    20. Mina, Wasseem, 2015. "Political risk guarantees and capital flows: The role of bilateral investment treaties," Economics - The Open-Access, Open-Assessment E-Journal (2007-2020), Kiel Institute for the World Economy (IfW Kiel), vol. 9, pages 1-38.

    More about this item

    Statistics

    Access and download statistics

    Corrections

    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:wly:povpop:v:4:y:2012:i:3:p:49-57. See general information about how to correct material in RePEc.

    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.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with 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.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)1944-2858 .

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

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.