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date: 15 February 2019

Abstract and Keywords

This chapter discusses the role of government policies in fostering, or inhibiting, foreign direct investment (FDI) by multinational companies in emerging nations. Using World Bank data on 149 emerging nations, the chapter examines the impact of government policies and institutions on the magnitude of inward FDI each country receives. Certainly, socioeconomic factors such as the size of the local market, human capital, and skills remain powerful determinants of FDI flows. But, ceteris paribus, the results show that the institutional environment does plays a substantial role in determining the magnitude of FDI inflows received by a nation. Globalization, measured by FDI as well as trade, data, and people flows, is cyclical. But all in all, globalization has seen a massive increase since the 1980s, when a sea change occurred in government policies toward international business. Formerly socialist and inward-oriented policies were almost universally replaced by a liberal free-market posture.

Keywords: globalization, Institutional factors, FDI, government policies, emerging nations

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