Investment promotion and FDI inflows: quality matters

Harding, Torfinn and Javorcik, Beata S (2013) Investment promotion and FDI inflows: quality matters. CESifo Economic Studies, 59 (2). pp. 337-359. ISSN 1612-7501

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Information asymmetries constitute a significant obstacle to capital flows across international borders, and in particular to flows of foreign direct investment (FDI) to emerging markets. Many governments aim to reduce information barriers by engaging in investment promotion activities. Despite potentially large benefits of FDI and popularity of investment promotion intermediaries (IPIs), relatively little is known about their effectiveness. This study uses data collected through the Global Investment Promotion Benchmarking (GIPB) exercise to examine whether higher quality of IPI services translates into higher FDI inflows. The analysis, based on information on 156 countries, suggests that countries with IPIs able to handle investor inquiries in a more professional manner and IPIs possessing higher quality Web sites tend to attract greater volume of FDI. These results are robust to using sector level data and instrumental variable approach.

Item Type: Article
Schools and Departments: School of Business, Management and Economics > Economics
Subjects: H Social Sciences
Depositing User: Torfinn Harding
Date Deposited: 29 Oct 2012 15:34
Last Modified: 07 Oct 2013 10:17
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