A1 - Mariya Aleksynska
A1 - Olena Havrylchyk
TI - FDI from the South: the Role of Institutional Distance and Natural Resources
IS - 2011-05
T3 - Working Papers
KW - Foreign direct investment
KW - South-South
KW - developing countries
KW - institutions
KW - crowding-in
N2 - This study explores location choices for investors stemming from emerging economies (often referred to as the South), with a particular emphasis on institutions and natural resources. Relying on a novel dataset of bilateral FDI flows between 1996 and 2007, we demonstrate that FDI from the South has a more regional aspect than investment stemming from the North. Institutional distance has an asymmetric effect on FDI depending on whether investors choose countries with better or worse institutions. In the latter case, a large institutional distance between source and destination countries discourages FDI inflows, but the growing attractiveness of the primary sector outweighs this deterring effect for emerging investors. We also attest to the complementary relationship between capital flows from the North and South in developing recipient countries, which we attribute to different FDI patterns of these investors.
ER -