Foreign direct investment has been studied for years. It is generally accepted as a positive influence on the domestic market and governments have begun actively seeking it out. This study is meant to possibly connect government actions, for which the World Bank’s ‘Doing Business Index’ was used as a proxy, to an increase in foreign direct investment inflows. The goal of this study is to help governments make more informed decisions about if and how to attract foreign direct investment. The research was done by running a regression model to find a connection between changes in foreign direct investment inflows and the Doing Business rank of each country. The results of the regression show that by increasing their country’s Doing Business rank one level, a government can bring in over $44 million USD. Thus, the model has proven that there is a connection between government actions and foreign direct investment; countries can actively pursue foreign investment dollars successfully. The Doing Business Index points to practical areas which are important to multinational companies, such as the time it takes to compute and pay taxes, which the government can control. Therefore, this study not only proves that it is worthwhile for governments to change in order to attract foreign investment but gives the beginning of a blueprint for what government actions bring in the most investments.
Recommended CitationPiwonski, Katherine, "Does the ‘Ease of Doing Business’ In a Country Influence its Foreign Direct Investment Inflows?" (2010). Honors Projects in Finance. Paper 13.