Institutional determinants of inward FDI: Evidence from Pakistan

Moshfique Uddin, Anup Chowdhury, Sheeba Zafar, Sujana Shafique, Jia Liu

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    Abstract

    FDI has been growing at a spectacular pace all over the world and emerging countries have been successful in attracting more FDI compared to developed countries. Institutional factors are becoming more important as determinants of inward FDI for emerging markets. However, research in this area is inadequate and also incosnsistent in terms of findings. In this paper, we have examined the institutional determinants of Pakistani FDI inflows and also examined the relative importance of those factors. The paper has found that certain institutional determinants such as size of the government, legal structure and strong property rights, freedom to trade and civil liberty have strong positive effect on FDI inflows. Among the institutional variables, regulation has been found to be most important to influence inward FDI flow to Pakistan. The paper has also found evidence that there was a structural break in FDI flows in Pakistan which coincides with market liberalization programme in early 1990s. This confirms the effectiveness of conducive institutional environment to attract foreign investment. Moreover, we have found that military government is more successful in attracting FDI compared to democratic government in Pakistan.
    Original languageEnglish
    Pages (from-to)344-358
    JournalInternational Business Review
    Volume28
    Issue number2
    Early online date23 Oct 2018
    DOIs
    Publication statusPublished - 1 Apr 2019

    Keywords

    • Institutional theory
    • Determinants
    • FDI
    • Inflows
    • Emerging country
    • Pakistan

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