THE DETERMINANTS OF OUTWARD FDI FROM DEVELOPING COUNTRIES: ROLE OF POLITICAL CONNECTIONS
Abstract
The purpose of the paper is to develop a new theoretical model that would analyze the characteristics of outward foreign direct investment in a specific financial and institutional environment. Research methodology. We have developed a theoretical model based on Helpman’s model, which focuses on the influence of political relations of the enterprise on FDI decisions and the relationship of political relations and productivity in management decisions. Results. Several hypotheses follow from the theory that requires empirical testing. First, the growth of political ties and productivity growth increase the likelihood of FDI. In addition, the thresholds for political ties and productivity required for FDI increase as the recipient countries investment climate deteriorates (expressed in terms of three indicators: lower demand, higher entry costs and lower trade costs). The practical significance of the research results. The use of the proposed theoretical and applied approaches will increase the effectiveness of foreign investment from developing countries.
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