U.S. Manufacturing MNCs' Foreign Direct Investment: The Impact of Governance Institutions of the Host Country

In recent, importance of quality of governance institutions of the host country has been increased in attracting FDI. Previous studies evaluating the impact of governance institutions on FDI have been inconclusive, yet quality of governance institution still plays in attracting FDI. This study examines the effect of quality of governance institutions of the host country on U.S. manufacturing foreign direct investment(FDI). Secondary data for the 50 host countries of U.S. manufacturing FDI over the period 1999-2007 were used in this study. In this study, FDI data are computed within a three- years moving average framework(the average of the present year and the two preceding years) to solve the missing data problem. Research findings show that quality of governance institutions has the positive effect on U.S. manufacturing FDI, when controlling for economic and demographic factors.