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This paper investigates the link between foreign direct investment (FDI), democracy and economic growth on a panel of eight Southern African countries for 1980-2014 using the system generalized method-of-moment (GMM) estimator. We find that FDI has a direct positive effect on economic growth and that strong democratic institutions are a significant driver of economic growth in the sample countries. The impact of FDI on economic growth is dependent on the level of democracy in the host countries. This implies that countries with strong democratic institutions are better able to absorb the positive spillovers from FDI. In policy terms, Southern African countries should sustain the institutional reform policy agenda already in place in order to benefit more from the significant inflows of FDI. [ABSTRACT FROM AUTHOR]

Purpose: Corruption has shown a mixed impact on foreign direct investment (FDI). This study proposed moderating the role of two—foreign aid (international institution) from the home country and democracy (national institution) in the host country—between corruption‐FDI nexus. Methodology: The framework is analyzed using panel data analysis (2001–2018) of bilateral foreign aid and FDI from 18 European members of the Organization for Economic Cooperation and Development (OECD) to 34 African countries. Findings: The presents several key findings. First, Africa's level of government corruption harms bilateral FDI from Europe. Second, the OECD's bilateral foreign aid moderates the negative effects of Africa's host‐country corruption on FDI. Third, the level of democracy in the host country also moderates the negative impact of corruption on FDI. Finally, foreign aid strongly moderates the negative effect of corruption on FDI in democratic countries compared to non‐democratic host countries. Research Implications: This study provides the institutional analysis that bilateral foreign aid and democracy as formal institutions affect the European multinational enterprises's decision to invest in Africa. Practical Implications: It presents the policy and managerial implications. First, European MNEs managers avoid investing in Africa, and governments must take strict actions to attract FDI. Second, foreign aid and democracy motivate MNEs to invest in Africa. Finally, the OECD policymaker could formulate rigorous and relevant conditions for foreign aid to Africa to reduce corruption. Originality/Value: Through the lens of institutional theory and selectorate theory, the novel institutional role of foreign aid and democracy is proposed and tested between the nexus of corruption‐FDI. [ABSTRACT FROM AUTHOR]

This article investigates the impact of democracy on the foreign direct investment (FDI)–economic growth nexus by considering both a country's current and past political regimes. We apply a linear dynamic panel data model to data from 53 African countries over the period 1989–2014. Standard errors of the estimates are Weidmeijer corrected, following an orthogonal deviations transformation. The results show that the direct impact of FDI on growth is positive and significant. Likewise, the stock of democracy plays a positive and significant role in the growth process. However, the positive impact of FDI on growth decreases with the improvement in the historical experience of a country with democracy. These findings imply that with contemporary efforts to expand political rights in Africa, it is critical to identify alternative channels that facilitate the transmission of the flow of FDI into further and sustainable growth. [ABSTRACT FROM AUTHOR]

Despite the ties between politics and economics, little attention has been given to how economic development affects foreign policy. To fill the gap in the literature, Heo and Roehrig developed a theoretical framework, linking economic development and foreign relations. We refine the theory and name it development power theory, which is based on the logic that economic development influences a country's foreign policy in three broad directions: (i) it encourages a transition to democracy that leads to elite changes and foreign‐policy modification; (ii) it provides more resources and a larger set of tools to be used to pursue a broader set of national interests; and (iii) it enhances pride and ambition among state leaders and the public, resulting in a stronger military and a greater role in international affairs. Then, we apply the theory to the South Korean case. [ABSTRACT FROM AUTHOR]