Institutional quality and FDI to the south : an analytical approach

Darby, Julia and Desbordes, Rodolphe and Wooton, Ian; Beugelsdijk, S. and Brakman, S. and Garretsen, J.H. and van Ees, H., eds. (2013) Institutional quality and FDI to the south : an analytical approach. In: Firms in the International Economy. MIT Press, Cambridge MA, USA. ISBN 9780262019743

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Abstract

We ask whether MNEs' experience of institutional quality and political risk within their “home” business environments influences their decisions to enter a given country. We set out an explicit theoretical model that allows for the possibility that firms from South source countries may, by virtue of their experience with poor institutional quality, derive a competitive advantage over firms from North countries with respect to investing in destinations in the South. We show that the experience gained by such MNEs of poorer institutional environments may result in their being more prepared to invest in other countries with correspondingly weak institutions.