7 research outputs found
Roll out the red carpet and they will come : investment promotion and FDI inflows
As red tape in host countries and information asymmetries constitute a
significant obstacle to investment flows across international borders, an important
policy question is: what can aspiring FDI destinations do to reduce such barriers? This
study uses newly collected data on 124 countries to examine the effects of investment
promotion on inflows of US FDI. We test whether sectors explicitly targeted by
investment promotion agencies in their efforts to attract FDI receive more investment
in the post-targeting period, relative to the pre-targeting period and non-targeted
sectors. The results of our analysis are consistent with investment promotion leading
to higher FDI flows to countries in which red tape and information asymmetries are
likely to be severe. The data suggest that investment promotion works in developing
countries but not in industrialized economies