Publication detail

Political Risk, Institutions and Foreign Direct Investment: How Do They Relate in Various European Countries?

Author(s): doc. Ing. Vladimír Benáček CSc., Lenihan, Helena; Andreosso Bernadette; Kan Denis
Mgr. Eva Michalíková , Lenihan, Helena; Andreosso Bernadette; Kan Denis
Type: Articles in journals with impact factor
Year: 2013
Number: 0
ISSN / ISBN: 1467-9701
Published in: J. Wiley and sons
Publishing place: Britain, Univ. of Nottingham
Keywords: FDI; Political risk; Economic institutions; Panel regression; European Union
JEL codes: F2; D81; C23
Suggested Citation: Political Risk, Institutions and Foreign Direct Investment: How Do They Relate in Various European Countries?. World Economy. doi: 10.1111/twec.12112
Grants: GAČR č. P402/12/0982: Trade Flows in Times of Economic Boom and Slump: Modifying the Gravity Model for Country, Time and Product-Specific Decision-Making
Abstract: This paper examines theoretically and empirically the extent to which the decisions by foreign firms to invest in a group of countries are influenced by economic factors, as opposed to political risk and institutional factors. We test our hypotheses on 35 European countries by means of panel regression techniques over the 1995-2008 period. Our results suggest that policies and institutions, which differ widely between countries, when assessed quantitatively from both static and dynamic perspectives, significantly influence the behaviour of investors in their dual decisions about where to invest and how much to invest. Clustering countries into three groups according to levels of economic maturity revealed that the role of “soft” political factors in FDI decisions is less persistent and less predictable than the role of “hard” economic factors.
Downloadable: Political Risk, Institutions and Foreign Direct Investment: How Do They Relate in Various European Countries?
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