Multi-level Determinants of Inward FDI Ownership

Abstract

In this paper, we empirically analyse the determinants of FDI ownership into developing countries. We do this by using firm-level data obtained from the Enterprise Surveys data of the World Bank and country level data from various sources. Using a multi-level logit model, we analyse how institutional and structural variables at both firm and country levels impact inward FDI. In our view, there is a gap between analysis at the country level studies and firm level studies on inward FDI. In this paper, we fill the gap by doing a multi-level regression analysis, taking into account both firm variables and country characteristics to explain inward FDI ownership. We find that firm structural characteristics and obstacles they face most affect inward FDI. While some macroeconomic variables such as GDP per capita, inflation and openness have a significant influence, other variables that measure institutional quality of a country do not have any statistically significant influence on FDI inflow.