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Igor Drapkin
i.m.drapkin@mail.ru
https://orcid.org/0000-0002-5989-8463
Igor Drapkin
Ural Federal University, 19 Mira Street, 620002, Yekaterinburg , Russia
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Sergey Lukyanov
https://orcid.org/0000-0002-0736-1533
Sergey Lukyanov
Ural Federal University, 19 Mira Street, 620002, Yekaterinburg , Russia
State University of Management, Russia
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State University of Management, Russia
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Vadim Shelkovnikov
https://orcid.org/0000-0002-4860-3092
Vadim Shelkovnikov
Ural Federal University, 19 Mira Street, 620002, Yekaterinburg , Russia
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Abstract
This study focuses on the influence of institution quality on foreign direct investment (FDI) outflows. For empirical estimation, we use a dataset covering 102 home and 67 host countries from 2001 to 2016. We use the gravity approach and apply the Poisson pseudo maximum likelihood method to derive unbiased estimates. A set of institutional variables in a country is integrated into a single institutional index using principal component analysis. Our main findings are the following. First, we only identify a positive influence of the level of institutional development on FDI outflows for the institutionally developed countries. Second, we have not found evidence for crowding out national investment in the countries with weak institutions. Third, increases in the level of institutions stimulate horizontal rather than vertical outward FDI in an economy. Finally, institutional distance negatively affects the level of outward FDI only when the institutional distance between the two countries is large. The policy implications of this research are strongly in favour of further developing institutions.
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Corvinus University of Budapest
Department of Economics
Fővám tér 8 Budapest, H-1093, Hungary
E-mail: vanyai.judit@krtk.hu
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