Prague Economic Papers 2026, 35(1):28-55 | DOI: 10.18267/j.pep.903

The Institutional-Economic Nexus in Driving Greenfield FDI to European Countries

Ľubica Štiblárová ORCID...
Technical University of Kosice, Faculty of Economics, Nemcovej 32, 040 01 Kosice, Slovak

While theoretical perspectives often emphasize the role of high-quality institutions in attracting foreign investors, empirical findings remain rather mixed. This study advances existing research by exploring the interplay between quality of institutions and economic development in driving greenfield foreign direct investment (FDI) in European countries. The results do not suggest that better institutions alone directly help attract FDI in the selected European sample from 2003-2022. However, in more economically developed host countries, institutional quality plays a significant role, whether measured by real GDP per capita or GNI per capita. Further analysis reveals that both legal and political components of institutional quality have a beneficial conditional effect in more developed countries. Conversely, this finding does not hold uniformly across all FDI; it applies to FDI in the services sector but not in manufacturing, which may be explained by efficiency-seeking motives.

Keywords: institutional quality; legal and political institutions; economic development; foreign direct investment; investment motives
JEL classification: E22, F21, O17, O43

Received: April 23, 2025; Revised: December 4, 2025; Accepted: December 30, 2025; Published: April 1, 2026  Show citation

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Štiblárová, Ľ. (2026). The Institutional-Economic Nexus in Driving Greenfield FDI to European Countries. Prague Economic Papers, 35(1), 28-55. doi: 10.18267/j.pep.903
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