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The Interrelationships Among Informal Institutions, Formal Institutions, and Inward Foreign Direct Investment

R. Michael Holmes¹; Toyah Miller²; Michael A. Hitt³; M. Paz Salmador⁴

¹ Florida State University · ² Indiana University · ³ Texas A&M University · ⁴ Universidad Autónoma de Madrid

This research contributes to institutional theory by examining the influence of informal institutions on formal institutions and the effects of formal institutions on inward foreign direct investment. In particular, the authors integrate prior research from multiple disciplines to identify and to examine the roles of a country’s formal regulatory, political, and economic institutions. The results suggest that the country’s informal institutions, in the form of the cultural dimensions of collectivism and future orientation, shape the country’s formal institutions. In turn, each of the three formal institutions affects the country’s level of inward foreign direct investment differently. To facilitate future research, the authors also provide a set of measures for formal institutions in 50 countries.

DOI

10.1177/0149206310393503

Volume

39 (2)

Pages

531-566

Language

en

Export

BibTeX

Sources

crossref