Publication Type
Journal Article
Version
acceptedVersion
Publication Date
1-2021
Abstract
This paper builds a theory based on “informal institutions” to characterize the comparative advantage of South-based MNEs. MNEs headquartered in countries with poorer state institutions are shown to endogenously invest more in firm-specific institutional capital to compensate for the lack of state institutions, and as an optimal response, undertake FDI in countries with weaker institutions. We conduct an extensive test of the theory using worldwide firm-level greenfield FDI flows during 2009–2016, employing (among others) variations in the interaction of prevalence of informal institutions at home and state institutional qualities of host countries, as well as heterogeneity across sectors and firms in their sensitivity to institutional support.
Keywords
FDI location, Firm productivity, Firm R&D intensity, Informal institution
Discipline
Finance | International Economics | Technology and Innovation
Research Areas
International Economics
Publication
Journal of Development Economics
Volume
148
First Page
1
Last Page
24
ISSN
0304-3878
Identifier
10.1016/j.jdeveco.2020.102566
Publisher
Elsevier
Citation
1
Copyright Owner and License
Authors
Creative Commons License
This work is licensed under a Creative Commons Attribution-NonCommercial-No Derivative Works 4.0 International License.
Additional URL
https://doi.org/10.1016/j.jdeveco.2020.102566