Determinants of Foreign Direct Investment in Developed and Emerging Markets

Jerzy Różański, Paweł Sekuła



We analyzed FDI determinants for 26 developed economies and 25 emerging markets. The analysis was conducted using a panel regression model for the period 1996–2014 as well as macroeconomic and institutional variables. Growth dynamics, increasing welfare, and the size of the market positively influence FDI. Among institutional variables, government stability index and the rule of law index exert positive impact upon FDI. Misgivings with respect to the quality of democracy and corruption do not undermine FDI inflow.


developed economies; emerging markets; foreign direct investment; institutional determinants; panel data.

Full Text:



Asiedu, E. (2006), Foreign direct investment in Africa: The role of natural resources, market size, government policy, institutions and political instability, World Economy, 29(1), 63–77, DOI:

Assuncao, S., Forte, R., Teixeira, A. A. C. (2011), Location determinants of FDI: a literature review, FEP Working Papers, Universidade do Porto, 433,1–26.

Azman-Saini, W. N. W., Baharumshah, A. Z., Law, S. H. (2010), Foreign direct investment, economic freedom and economic growth: International evidence, Economic Modelling, 27(5), 1079–1089, DOI:

Biswas, R. (2002), Determinants of foreign direct investment, Review of Development Eco-nomics, 6(3), 492–504, DOI:

Botrić, V., Škuflić, L. (2006), Main determinants of foreign direct investment in the South-east European countries, Transition Studies Review, 13(2), 359–377, DOI:

Caves, R. (1971), International corporations: the industrial economics of foreign investment, Economica, 38(149), 1–27, DOI:

Doytch, N., Eren, M. (2012), Institutional determinants of sectoral FDI in Eastern European and Central Asian countries: The role of investment climate and democracy, Emerging Markets Finance & Trade, 48(4), 14–32.

Dunning, J. H. (1988), The eclectic paradigm of international production: a restatement and possible extensions, Journal of International Business Studies, 19(1), 1–31, DOI:

Dunning, J. H. (2000), The eclectic paradigm as an envelope for economic and business theories of MNE activity, International Business Review, 9(2), 163–190, DOI:

Faeth, I. (2009), Determinants of foreign direct investment – a tale of nine theoretical models, Journal of Economic Surveys, 23(1), 165–196, DOI:

Kinda, T. (2010), Investment climate and FDI in developing countries: Firm-level evidence, World Development, 38(4), 498–513, DOI:

Lucas, R. E. B. (1993), Determinants of direct foreign investment: evidence from East and Southeast Asia, World Development, 21(3), 391–406, DOI:

Markusen, J. R., Venables, A. J. (1998), Multinational firms and the new trade theory, Journal of International Economics, 46(2), 183–203, DOI:

Markusen, J. R., Venables, A. J. (2000), The theory of endowment, intra-industry, and multi-national trade, Journal of International Economics, 52(2), 209–234, DOI:

Root, F. R., Ahmed, A.A. (1978), The influence of policy instruments on manufacturing direct foreign investment in developing countries, Journal of International Business Studies, 9(3), 81–93, DOI:

Schneider, F., Frey, B. S. (1985), Economic and political determinants of foreign direct in-vestment, World Development, 13(2), 161–175, DOI:

Vernon, R. (1966), International investment and international trade in the product cycle, Quarterly Journal of Economics, 80(2), 190–207, DOI:

Vijayakumar, N., Sridharan, P., Rao, K. C. S. (2010), Determinants of FDI in BRICS coun-tries: A panel analysis, International Journal of Business Science and Applied Man-agement, 5(3), 1–13.

Wang, Z., Swain, N. J. (1997), Determinants of inflow of foreign direct investment in Hungary and China: time-series approach, Journal of International Development, 9(5), 695–726, DOI:;2-N.

ISSN (print) 1234-3862
ISSN (online) 2450-7067

Partnerzy platformy czasopism