1 research outputs found
Political Regime and Vertical vs. Horizontal FDI
We introduce the effect of the political regime in a model of North-South bilateral foreign
direct investment (FDI), and test whether it matters for the nature of FDI inflows to
emerging markets. Alternative political regimes in the host country may affect the
incentive for foreign investors to implement horizontal rather than vertical FDI, if the
political expropriation risk is different for the two kinds of investment. We test the model
in a panel of 14 source countries and 24 host countries over 1992-2004, and find that
autocracies are likely to receive relatively more FDI of the vertical type, while
democracies are more likely to be associated with horizontal FDI inflows.We introduce the effect of the political regime in a model of North-South bilateral foreign
direct investment (FDI), and test whether it matters for the nature of FDI inflows to
emerging markets. Alternative political regimes in the host country may affect the
incentive for foreign investors to implement horizontal rather than vertical FDI, if the
political expropriation risk is different for the two kinds of investment. We test the model
in a panel of 14 source countries and 24 host countries over 1992-2004, and find that
autocracies are likely to receive relatively more FDI of the vertical type, while
democracies are more likely to be associated with horizontal FDI inflows.Non-Refereed Working Papers / of national relevance onl