FDI in Selected Developing Countries: Evidence from Bundling and Unbundling Governance

Forthcoming: European Journal of Government and Economics

EXCAS Working Paper WP/19/057

34 Pages Posted: 19 Sep 2019

See all articles by Simplice Asongu

Simplice Asongu

African Governance and Development Institute

Date Written: January 11, 2019

Abstract

The objective of this study is to assess governance drivers of FDI in a panel of BRICS and MINT countries for the period 2001-2011. We bundle and unbundle governance determinants using a battery of contemporary and non-contemporary estimation techniques. Our findings reveal the following: Firstly, for both contemporary and non-contemporary specifications, while the majority of our governance determinants of Gross FDI are significant, they are overwhelmingly insignificant for Net FDI. Secondly, the significance of the governance dynamics in increasing order of magnitude are general governance, political governance, economic governance, political stability, regulation quality and government effectiveness. Thirdly, for non-contemporary specifications, the significance of governance variables is as follows in ascending order of magnitude: economic governance, institutional governance, general governance, corruption-control, political governance and political stability. The importance of combining governance indicators is captured by the effects of political governance, economic governance and institutional governance. The results indicate that the simultaneous implementation of the various components of governance clarifies a country’s attractiveness for FDI location. Policy implications are discussed with particular emphasis on the timing of FDI and its targeting.

Keywords: Foreign direct investment, emerging countries, governance

JEL Classification: C52; F21; F23; P37; P39

Suggested Citation

Asongu, Simplice, FDI in Selected Developing Countries: Evidence from Bundling and Unbundling Governance (January 11, 2019). Forthcoming: European Journal of Government and Economics, EXCAS Working Paper WP/19/057, Available at SSRN: https://ssrn.com/abstract=3452271 or http://dx.doi.org/10.2139/ssrn.3452271

Simplice Asongu (Contact Author)

African Governance and Development Institute ( email )

P.O. Box 8413
Yaoundé, 8413
Cameroon

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