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The never-ending debate: Do FDI promote institutional change? Evidence from India and partner countries

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  • Kumari, Khushboo
  • Ramachandran, Renjith

Abstract

Institutional quality has been opined as a significant determinant of FDI inflow in international business literature. On the contrary, literature on determinants of institutional quality and how it changes is scant and merits further study. This study analyses the impact of FDI on institutional distance in the context of India and its partner countries, i.e., whether it leads to convergence or divergence of institutional distance. We identified a significantly positive impact of FDI on institutional distance. Further, to capture the heterogeneity among our partner countries, we subdivided our sample based on the partner country's development level and analysed the source of change in institutional distance.

Suggested Citation

  • Kumari, Khushboo & Ramachandran, Renjith, 2024. "The never-ending debate: Do FDI promote institutional change? Evidence from India and partner countries," Journal of Policy Modeling, Elsevier, vol. 46(2), pages 432-447.
    • Handle: RePEc:eee:jpolmo:v:46:y:2024:i:2:p:432-447
    DOI: 10.1016/j.jpolmod.2023.10.005
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    Keywords

    Bilateral FDI; Emerging countries; Institutional distance; Divergence;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • F63 - International Economics - - Economic Impacts of Globalization - - - Economic Development
    • O43 - Economic Development, Innovation, Technological Change, and Growth - - Economic Growth and Aggregate Productivity - - - Institutions and Growth

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