Impact of Institutional Quality on the Attractiveness of Foreign Direct Investment

Nedra Baklouti^1, and Younes Boujelbene¹

¹Unit of Research in Applied Economics, Faculty of Economics and Management, Sfax, Tunisia

Cite this paper:
Nedra Baklouti and Younes Boujelbene. Impact of Institutional Quality on the Attractiveness of Foreign Direct Investment. Journal of Behavioural Economics, Finance, Entrepreneurship, Accounting and Transport. 2014; 2(4):89-93. doi: 10.12691/jbe-2-4-2

Abstract

The purpose of the paper is to investigate the factors that encourage and inhibit FDI flows to countries in the Middle East and North Africa (MENA). Previous studies on the effect of the institutional quality on the attractiveness of Foreign Direct Investment have produced mixed results. In an attempt to explain these ambiguous results, this study investigates the impact of the institutional quality on the attractiveness of Foreign Direct Investment by taking into account the role of the transparency in each country. However, recent research suggests that for countries to fully benefit from openness strategies the functioning of institutions might be crucial. Using the fixed effects models on the panel data of 8 countries selected of the developing countries in the Middle East and North Africa (MENA) over the period 1996 to 2008, the results of this estimation indicate the quality of the institutional environment which presents itself as a relevant factor in the attraction of FDI and the indicators of corruption and regulatory quality have a negative influence on FDI while the indicator of the effectiveness of public action has a positive influence. In this article FDI flows to MENA are investigated, which adds value to the accumulate knowledge of business environments in other regions in the developing.

Keywords:
institutional quality FDI corruption MENA

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