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Home Country Institutions and Outward FDI: An Exploratory Analysis in Emerging Economies

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  • Ricardo E. Buitrago R.

    (Facultad de Ciencias Naturales e Ingeniería, Universidad Jorge Tadeo Lozano, Bogotá 11001, Colombia
    Escuela de Administración, Universidad del Rosario, Bogotá 11001, Colombia)

  • María Inés Barbosa Camargo

    (Facultad de Ciencias Económicas y Sociales, Universidad de La Salle, Bogotá 11001, Colombia)

Abstract

Although the internationalization of economies is driven by specific industry conditions or business-specific differences, the institutions that exist as background conditions directly determine firms’ strategies and interactions in the international environment. This paper contributes to the discussion on the relationship between institutional quality and outward FDI (OFDI). We used 30 indicators in 48 emerging economies in the period 2007–2017; we collected the indicators from alternative secondary sources. After we applied Factor Analysis, six factors were retained. We named the components as follows: “Transparency of government” (F1), “Research, development and innovation, R&D+I” (F2), “Inequality” (F3), “Rules on inward FDI (IFDI)” (F4), “Education and training” (F5), and “Financial market” (F6). The panel data model outcomes suggest that Factor 2, Research, development and innovation, has a significant and positive effect on OFDI. Factor 6, the Financial market, has a significant and negative effect on OFDI. When we include lagged values of OFDI stocks the results also show that the government measures transparency positively and significantly affects OFDI stocks. These findings imply that the institutional environment creates two streams of OFDI: leverage and escapism.

Suggested Citation

  • Ricardo E. Buitrago R. & María Inés Barbosa Camargo, 2020. "Home Country Institutions and Outward FDI: An Exploratory Analysis in Emerging Economies," Sustainability, MDPI, vol. 12(23), pages 1-20, November.
    • Handle: RePEc:gam:jsusta:v:12:y:2020:i:23:p:10010-:d:454089
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    Cited by:

    1. Ricardo E. Buitrago R. & María Inés Barbosa Camargo & Favio Cala Vitery, 2021. "Emerging Economies’ Institutional Quality and International Competitiveness: A PLS-SEM Approach," Mathematics, MDPI, vol. 9(9), pages 1-18, April.
    2. Ai Ngoc Nhan Le & Ha Pham & Dung Thi Ngoc Pham & Khoa Dang Duong, 2023. "Political stability and foreign direct investment inflows in 25 Asia-Pacific countries: the moderating role of trade openness," Palgrave Communications, Palgrave Macmillan, vol. 10(1), pages 1-9, December.
    3. Henri Bezuidenhout & Gabriel Mhonyera & Jacob Van Rensburg & Hsia Hua Sheng & José Marcos Carrera & Xinjian Cui, 2021. "Emerging Market Global Players: The Case of Brazil, China and South Africa," Sustainability, MDPI, vol. 13(21), pages 1-19, November.
    4. Chunhuan Xiao & Ziyin Zhuang & Amei Feng, 2021. "OFDI Entry Modes and Firms’ Innovation: Evidence from Chinese A-Share Listed Firms," Sustainability, MDPI, vol. 13(14), pages 1-17, July.
    5. Mehmed Ganic, 2022. "Does Institutional Quality Matter for the IDP Hypothesis? Evidence from Emerging Europe," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 24(1), pages 83-113, June.
    6. Eman Elish, 2022. "Political and productive capacity characteristics as outward foreign direct investment push factors from BRICS countries," Palgrave Communications, Palgrave Macmillan, vol. 9(1), pages 1-10, December.
    7. Heredia Pérez, Jorge A. & Geldes, Cristian & Kunc, Martin H. & Flores, Alejandro, 2023. "The effect of local institutions on the competitive strategies of exporters. The case of emerging economies in Latin America," Journal of Business Research, Elsevier, vol. 169(C).
    8. Alfredo Jimenez & Jeoung Yul Lee & Xavier Ordeñana, 2021. "Introduction: FDI and Institutional Quality: New Insights and Future Perspectives from Emerging and Advanced Economies," Sustainability, MDPI, vol. 13(8), pages 1-4, April.

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