Institutions and FDI from BRICS countries: a meta-analytic review

Emerging multinational corporations are grown-up from environments where institutional quality (IQ) is generally poor and market mechanisms are inefficient. Having experience at home, firms from emerging markets have transformed institutional disadvantages into advantages, especially through investing in developing countries. In terms of investing abroad, is the host country's institutional quality a point of concern for emerging multinational corporations? Despite the economic benefits of well-organized institutions, several studies empirically tested the role of institutional quality on foreign direct investment (FDI) from emerging markets to provide inconclusive results. This study conducted a meta-analysis and empirical examination of the IQ-FDI nexus from five emerging markets, namely Brazil, Russia, India, China, and South Africa, collectively referred to as BRICS countries. We found that emerging multinational corporations invested in risky markets where institutional quality is generally modest. Our results suggest that state-owned enterprises persuasively invested in Africa for natural resources when they evaluate a positive and significant effect size of IQ on FDI. We also found that collected estimates contain genuine evidence concerning the effect of a host country’s institutional framework on FDI from BRICS countries.