Open Economies Review

, Volume 21, Issue 2, pp 201–219 | Cite as

Do Institutions Matter for Foreign Direct Investment?

Review Article


Using a panel of 69 countries during 1981 and 2005, we investigate the role of institutions in determining foreign direct investment (FDI). We find that institutions are a robust predictor of FDI and that the most significant institutional aspects are linked to propriety rights. Using a novel data set, we also study the impact of institutions on FDI at the sectoral level. We find that institutions do not have a significant impact on FDI in the primary sector but that institutional quality matters for FDI in manufacturing, and particularly in services.


Foreign direct investment Institutions Sectoral FDI 

JEL Classification

F3 F4 


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Copyright information

© Springer Science+Business Media, LLC 2010

Authors and Affiliations

  • Fathi A. Ali
    • 1
  • Norbert Fiess
    • 1
  • Ronald MacDonald
    • 1
  1. 1.Department of EconomicsUniversity of GlasgowGlasgowUK

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