This research paper investigates whether the political style of nations has an impact on drawing foreign direct investment (FDI). A review of literature was conducted and research findings suggested that there is a relationship between mechanisms of government and foreign investment. This study sought to investigate these variables.
The following questions guided the research:
1. Is there a difference between groups representing free nations, partially free nations, and not free nations regarding political rights and civil liberties?
2. Do political rights and civil liberties predict foreign direct investment?
The hypotheses for the study are as follows:
Hypothesis 1. Free nations will draw more FDI than non-free nations.
Hypothesis 2. Higher levels of political rights and civil liberties will result in higher levels of FDI.
Archival research was used to examine the variables for this study. Political rights and civil liberties were operationally defined by the Freedom in the World survey used to gather data for this study. The Foreign Direct Investment database was also used to gather data. ANOVA was used to test the first hypothesis and regression analysis was used to test the second hypothesis. Following this, conclusions are presented.
The International Monetary Fund (IMF) (2003) defines foreign direct investment (FDI) as a category of international investment reflecting the objective of a resident in one economy (the direct investor) obtaining a lasting interest in an enterprise resident in another economy (the direct investment enterprise). The lasting interest implies that a long-term relationship between the parties is desirable and that there will be a significant degree of influence by the investor on the management of the enterprise. A direct investment relationship is established when the direct investor acquires 10 percent or more of the ordinary shares or voting power of an en...