Institutions and inward foreign direct investment in the primary sectors

Purpose Well-functioning institutions are repeatedly claimed to attract foreign direct investment (FDI) by reducing the costs and uncertainty of economic activity. Nonetheless, it has been argued that may matter less for FDI in primary sector. This study aims theoretically empirically investigate role attracting agricultural extractive activities. Design/methodology/approach uses worldwide country sector-level data on inward period 1996–2007. The key independent variables, property rights protection, corruption democracy, measured using World Bank Governance Indicators Polity IV as sources. Fixed effect panel regression, Tobit regression generalized method moments used analysis. Findings authors corroborate importance aggregate FDI. Disaggregating subsector, find FDI, like is attracted institutional features such rule law protection whereas not. also some evidence deters both subsectors. Originality/value take a first step toward linking largely empirical institutions-FDI literature more closely with economics-based theoretical discussions risk grounded approach, discuss issues effective control over investments, which vary between sectors. explore novel idea activities be sensitive because time horizon limited depletion resource, resulting an inherently relatively short-term commitment host-country location.