Title

Unbundling institutional determinants of multinational investments

Document Type

Journal article

Source Publication

Applied Economics

Publication Date

2017

Volume

49

Issue

23

First Page

2269

Last Page

2285

Publisher

Routledge

Keywords

FDI, property rights institution, contracting institution

Abstract

Previous studies often examined how a broad-based institution affects foreign direct investment (FDI) flows across countries. However, analysis of differential impacts of two or more constituent institutions within a broad-based institution appears to be more useful for policy decision-making. There is a paucity of studies on how constituent institutions within a broad measure of institution affect FDI across countries. Our article constitutes the first attempt in bridging this gap. In this article, we examine the relative effects of property rights institution (PI) and contracting institution (CI) on investment flows. Our results show that PI is much more important than CI in determining the cross-border flows of FDI and affiliate sales. Moreover, PI is found to be more important for FDI than for affiliate sales, indicating that final goods are less of a concern for being expropriated by governments and powerful elites than capital goods. Through unbundling a broad-based institution and examining how the constituent institutions affect investments flows, our article provides practical location decisions for investments in FDI, mergers and acquisitions (M&A) and affiliate sales.

DOI

10.1080/00036846.2016.1237754

Print ISSN

00036846

E-ISSN

14664283

Publisher Statement

Copyright © 2017 Routledge. Access to external full text or publisher's version may require subscription.

Full-text Version

Publisher’s Version

Recommended Citation

Xu, X., Voon, J. P. & Shang, Y. (2017). Unbundling institutional determinants of multinational investments. Applied Economics, 49(23), 2269-2285. doi: 10.1080/00036846.2016.1237754