Rights, Institutions, and Foreign Direct Investment: An Empirical Assessment1

Abstract

A burgeoning body of literature assesses the sociopolitical factors that influence investment decisions, including the nature of domestic institutions, societal rights, and participation in international institutions and agreements. Oddly enough, these have evolved largely as separate lines of research, and little effort has been made to compare the relative importance of these sociopolitical factors in making investment decisions. Moreover, though the diverse nature of foreign direct investment (FDI) is widely noted, extant research relies almost exclusively upon the examination of aggregate FDI. As a result, scholars have little insight into the ways that investors prioritize these factors, or how they vary across different industries. In an effort to synthesize these strands of research and further deepen our understanding of the determinants of investment decisions, this study models the prospective impact of several sociopolitical variables that have been found to significantly influence FDI—human rights, democratic governance, and commitment to international trade agreements and investment treaties—across multiple investment sectors.