Nathan M. Jensen, Glen Biglaiser, Quan Li, Edmund Malesky, Pablo M. Pinto, Santiago M. Pinto, and Joseph L. Staats Show What makes a country attractive to multinational corporations? DescriptionFor decades, free trade was advocated as the vehicle for peace, prosperity, and democracy in an increasingly globalized market. More recently, the proliferation of foreign direct investment has raised questions about its impact upon local economies and politics. Here, seven scholars bring together their wide-ranging expertise to investigate the factors that determine the attractiveness of a locale to investors and the extent of their political power. Multinational corporations prefer to invest where legal and political institutions support the rule of law, protections for property rights, and democratic processes. Corporate influence on local institutions, in turn, depends upon the relative power of other players and the types of policies at issue. "This book utilizes a wide array of evidence to provide a multifaceted and compelling explanation for how politics influences foreign direct investment (FDI). The authors demonstrate convincingly that democracy, veto players, rule of law, property rights, and partisanship all shape global investment patterns. The result is a must-read for anybody interested in FDI, and will also be of use to all interested in international
political economy more generally." Nathan M. Jensen is Associate Professor of Political Science at Washington University in St. Louis. Glen Biglaiser is Associate Professor of Political Science at the University of North Texas. Quan Li is Professor of Political Science at Texas A&M University. Edmund Malesky is Associate Professor of Political Science at Duke University. Pablo Pinto is Associate Professor of Political Science at Columbia University. Santiago Pinto is Research Economist at the Federal Reserve Bank of Richmond. Joseph L. Staats is Associate Professor of Political Science at the University of Minnesota, Duluth.
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journal article The Politics of Foreign Direct Investment into Developing Countries: Increasing FDI through International Trade Agreements?American Journal of Political Science Vol. 52, No. 4 (Oct., 2008) , pp. 741-762 (22 pages) Published By: Midwest Political Science Association https://www.jstor.org/stable/25193847 This is a preview. Log in to get access Abstract The flow of foreign direct investment into developing countries varies greatly across countries and over time. The political factors that affect these flows are not well understood. Focusing on the relationship between trade and investment, we argue that international trade agreements-GATT/WTO and preferential trade agreements (PTAs)-provide mechanisms for making commitments to foreign investors about the treatment of their assets, thus reassuring investors and increasing investment. These international commitments are more credible than domestic policy choices, because reneging on them is more costly. Statistical analyses for 122 developing countries from 1970 to 2000 support this argument. Developing countries that belong to the WTO and participate in more PTAs experience greater FDI inflows than otherwise, controlling for many factors including domestic policy preferences and taking into account possible endogeneity. Joining international trade agreements allows developing countries to attract more FDI and thus increase economic growth. Journal Information The American Journal of Political Science (AJPS), published four times each year, is one of the most widely-read political science journals in the United States. AJPS is a general journal of political science open to all members of the profession and to all areas of the discipline of political science. JSTOR provides a digital archive of the print version of American Journal of Political Science. The electronic version of American Journal of Political Science is available at http://www.blackwell-synergy.com/servlet/useragent?func=showIssues&code;=ajps. Authorized users may be able to access the full text articles at this site. Publisher Information The Midwest Political Science Association, founded in 1939, is a national organization of more than 2,800 political science professors, researchers, students, and public administrators from throughout the United States and over 50 foreign countries. The association is dedicated to the advancement of scholarly communication in all areas of political science. Each year the association sponsors a three-day conference of political scientists in Chicago for the purpose of presenting and discussing the latest research in political science. More than 2,000 individuals participate in this conference, which features 300 panels and programs on politics. The MPSA is headquartered at Indiana University. For further information, contact William D. Morgan, Executive Director, email: . Rights & Usage This item is part of a JSTOR Collection. What factors are considered important in regards to attracting FDI?On determinants, the paper finds that market size, infrastructure quality, political/economic stability, and free trade zones are important for FDI, while results are mixed regarding the importance of fiscal incentives, the business/investment climate, labor costs, and openness. II.
How can foreign direct investment be attracted to the country?Here are a few measures to attract FDI and what to prepare:
Documentation of how your business could work under a foreign country's government regulations. A list of any potential setbacks and how your business plans to rectify them. Potential profits an investor could gain by forming a partnership.
How does the government attract foreign investment?(i) Special Economic Zones have been set up to have world-class facilities such as cheap electricity, roads, transport, storage, etc. (ii) The companies set up their units in SEZs which are exempted to pay tax for initial period of five years. (iii) Labour laws are made flexible.
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How does the political economy influence the attractiveness of a country for FDI?
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