Determinants of foreign direct investment: does democracy matter?

Having access to foreign investment allows a country to acquire opportunities that otherwise could not be had. Many factors are important for attracting investment in developing countries, but there has been only a limited consensus on which factors play an unambiguous role. Using different econometric techniques for a data sample of 5 Asian developing countries and the period 1990 to 2012, we identify those factors that matter the most for explaining flows of foreign direct investment. Our results show that democracy positively affects investors' decisions about where to locate capital. Also, we find that foreign direct investment measured by share on GDP is significantly associated with low corruption and inflation and high openness, literacy rate and infrastructure. //ABSTRACT IN SLOVAK: Prílev priamych zahranicných investícií umozòuje mnohým státom vyuzíva prílezitosti, ktoré by inak nemali. Existuje ve'a faktorov, ktoré sa povazujú za determinanty priamych zahranicných investícií. Medzi ekonómami vsak nepanuje konsenzus o tom, ktoré z týchto faktorov sú k'úcové.