The influence of Doing Business’ institutional variables in Foreign Direct Investment

The growing importance of institutions as a determinant of inward FDI has sparked interest in determining their relationship. In the present study, we intended to explore the relationship between the institutional variables of the Doing Business report and inward FDI. The main question is whether Doing Business indicators explain worldwide differences in FDI. Doing Business is an international report that describes the business environment in various countries, through quantitative and qualitative indicators of the functioning of representative institutions. Our analysis covers 33 advanced economies and 144 developing countries for the 2004-2009 periods. The major implication is that in general, a better rated business environment is more likely to attract greater amounts of FDI, especially in case of developing countries. Moreover institutional areas that are most likely to influence inward FDI are: starting a business, registering a property and trading across borders.