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Informal Institutions and Foreign Direct Investment

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  • Belay Seyoum

Abstract

Foreign direct investment (FDI) inflows cannot solely be determined by conventional variables such as availability of natural resources, high skilled manpower or modern infrastructure. Important explanations also include the crucial role of institutions in attracting investment flows. This study explores the role of informal institutions in investment flows as well as the relationship between formal and informal institutions in the context of FDI flows. The term "informal institutions" has been used to describe a diverse set of practices such as corruption or culture thus leading to a serious conceptual ambiguity. This study attempts to provide a more precise and analytically useful definition. It builds on the Helmke and Levitsky typology of informal institutions.

Suggested Citation

  • Belay Seyoum, 2011. "Informal Institutions and Foreign Direct Investment," Journal of Economic Issues, Taylor & Francis Journals, vol. 45(4), pages 917-940.
    • Handle: RePEc:mes:jeciss:v:45:y:2011:i:4:p:917-940
    DOI: 10.2753/JEI0021-3624450409
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    Cited by:

    1. Ajai Gaur & Chinmay Pattnaik & Deeksha Singh & Jeoung Yul Lee, 2022. "Societal trust, formal institutions, and foreign subsidiary staffing," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1045-1061, August.
    2. Mbalyohere, Charles & Lawton, Thomas C., 2022. "Engaging informal institutions through corporate political activity: Capabilities for subnational embeddedness in emerging economies," International Business Review, Elsevier, vol. 31(2).
    3. Alaa M. S. Azazz & Ibrahim A. Elshaer, 2022. "Amid COVID-19 Pandemic, Entrepreneurial Resilience and Creative Performance with the Mediating Role of Institutional Orientation: A Quantitative Investigation Using Structural Equation Modeling," Mathematics, MDPI, vol. 10(12), pages 1-17, June.
    4. Mariotti, Sergio & Marzano, Riccardo, 2021. "The effects of competition policy, regulatory quality and trust on inward FDI in host countries," International Business Review, Elsevier, vol. 30(6).
    5. Samyukta Bhupatiraju, 2020. "Multi-level Determinants of Inward FDI Ownership," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 18(2), pages 327-358, June.
    6. Judit Kapás & Pál Czeglédi, 2020. "The impact of culture on FDI disentangled: separating the “level” and the “distance” effects," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 37(1), pages 223-250, April.
    7. Jasmine Mondolo, 2018. "How do informal institutions influence inward FDI? A systematic review," "Marco Fanno" Working Papers 0218, Dipartimento di Scienze Economiche "Marco Fanno".
    8. Moreira, Márcia Zabdiele & Ogasavara, Mário Henrique, 2018. "Formal and informal institutions and the expatriation assignment: The case of Japanese subsidiaries in Latin America," Japan and the World Economy, Elsevier, vol. 47(C), pages 18-26.
    9. Lucie Davidova & Vladimir Benacek, 2014. "Determinants of Austrian International Trade: Analysis Based on the Gravity Model," Working Papers IES 2014/15, Charles University Prague, Faculty of Social Sciences, Institute of Economic Studies, revised Feb 2014.
    10. Agboola, Alirat Olayinka & Scofield, David & Amidu, Abdul-Rasheed, 2017. "Understanding property market operations from a dual institutional perspective: The case of Lagos, Nigeria," Land Use Policy, Elsevier, vol. 68(C), pages 89-96.
    11. Mbalyohere, Charles & Lawton, Thomas C., 2018. "Engaging Stakeholders Through Corporate Political Activity: Insights From MNE Nonmarket Strategy in an Emerging African Market," Journal of International Management, Elsevier, vol. 24(4), pages 369-385.
    12. Sarker, Bibhuti & Serieux, John, 2023. "Multilevel determinants of FDI: A regional comparative analysis," Economic Systems, Elsevier, vol. 47(3).
    13. Papageorgiadis, Nikolaos & McDonald, Frank & Wang, Chengang & Konara, Palitha, 2020. "The characteristics of intellectual property rights regimes: How formal and informal institutions affect outward FDI location," International Business Review, Elsevier, vol. 29(1).
    14. Xiaorui Xin & Ivo Mossig, 2021. "Governments and Formal Institutions Shaping the Networks of Co‐Production in the Chinese and German Film Industries," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 112(3), pages 220-238, July.
    15. Chang, Pao-Li & Chen, Yuting, 2021. "Informal institutions and comparative advantage of South-based MNEs: Theory and evidence," Journal of Development Economics, Elsevier, vol. 148(C).
    16. Jasmine Mondolo, 2019. "How do informal institutions influence inward FDI? A systematic review," Economia Politica: Journal of Analytical and Institutional Economics, Springer;Fondazione Edison, vol. 36(1), pages 167-204, April.
    17. Antonio Baez‐Morales, 2021. "A panel data analysis of FDI and informal labour markets," Bulletin of Economic Research, Wiley Blackwell, vol. 73(3), pages 346-363, July.
    18. A. Fronzetti Colladon & R. Vestrelli & S. Bait & M. M. Schiraldi, 2024. "A Big Data Approach to Understand Sub-national Determinants of FDI in Africa," Papers 2403.10239, arXiv.org.
    19. Zhang, Mingqiong Mike & Lu, Ying & Zhu, Jiuhua Cherrie & Zhou, Hui, 2020. "Navigating the Web of Informal Institutions When Investing in a Strange Land: Chinese Multinational Enterprises in Australia," American Business Review, Pompea College of Business, University of New Haven, vol. 23(2), pages 316-334, November.
    20. Chenjian Zhang, 2022. "Formal and informal institutional legacies and inward foreign direct investment into firms: Evidence from China," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 53(6), pages 1228-1256, August.
    21. Muhammad Ahsan Ali Raza & Chen Yan & Hafiz Syed Mohsin Abbas & Atta Ullah, 2021. "Impact of institutional governance and state determinants on foreign direct investment in Asian economies," Growth and Change, Wiley Blackwell, vol. 52(4), pages 2596-2613, December.

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