Policy towards foreign direct investment: Domestic political and institutional determinants across middle income countries

The existing literature on foreign direct investment (FDI) has not addressed the question of how domestic politics and institutions within a middle income country (MIC) might determine its FDI-promotion policy. This dissertation contributes to the FDI literature by exploring some political and institutional variables within a MIC to explain its investment promotional and protectionist behaviors. The principal explanatory variables include a ruling party's ideological orientation and a country's institutional features. According to an institutional theory of FDI, a governing party's ideological positions tempered by the number of the so-called veto players determine a MIC's policy towards FDI. However, empirical analyses in this dissertation suggest that a ruling party's ideological disposition and/or supposed legislative opposition hardly translate into any significant cycle in FDI-policy outputs. To explore reasons behind the general absence of policy cycle in FDI promotion and protection, case studies on Latvia, Chile, Mexico and the Philippines present some contextual knowledge. The apparent stability in FDI policy in countries across the world owes mainly to realignment in preference within business in favor of greater investment promotion. The case studies also highlight some roles played by investment promotion agencies (IPAs). IPAs also collaborate with national businesses that seek to capture the so-called spillovers from FDI. Thus, IPAs embody the neo-liberal consensus among political and business leaders on greater FDI promotion even though investment protectionism persists in sectors or countries where domestically oriented businesses still enjoy political clout.