Determinants of foreign direct investments inflows into developing countries

FDI in developing countries remains weak. However, FDI can play an important role in the development of these countries which often have a low level of investment. Therefore, the objective of this study is to identify the factors that affect FDI inflows into developing countries. We used the Driscoll and Kraay model and Factor Analysis for a panel of 53 developing countries from 1996 to 2019 to achieve this aim. The findings reveal that FDI inflows into developing countries are primarily affected by institutional quality. Political stability and regulatory quality are two institutional elements that have a favourable and large effect on FDI inflows into developing countries, but Voice and Accountability have a negative and significant effect. To attract more FDI, developing countries should invest heavily in infrastructure and ensure political stability with an effective legal system, and enact language policies that allow one or two foreign languages to be officially recognised.