The effects of institutional distance on FDI inflow: General environmental institutions (GEI) versus minority investor protection institutions (MIP)

Jongmoo Jay Choi, Sang Mook Lee, Amir Shoham

Research output: Contribution to journalArticle

19 Scopus citations

Abstract

Existing research suggests that foreign direct investment (FDI) flows into countries with good institutional infrastructure. We distinguish between general environmental institutions (GEI) that promote societal interests at large, and minority investor protection (MIP) institutions that promote the interests of a specific group, and argue that these types of institutions affect international investments differently. We tested this hypothesis by examining the effects of institutional distance on international M&A activities of US firms during 1981–2008. We found that better GEI in the host country attracts inflowing FDI while better MIP may discourage it, because of the perception that it reduces the potential gain an acquiring firm can earn from an international acquisition in that country.

Original languageEnglish (US)
Pages (from-to)114-123
Number of pages10
JournalInternational Business Review
Volume25
Issue number1
DOIs
StatePublished - Feb 2016

All Science Journal Classification (ASJC) codes

  • Business and International Management
  • Finance
  • Marketing

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