Is the Importance of Location Factors Different Depending on the Degree of Development of the Country?

The increasing importance of Foreign Direct Investment (FDI) in the global markets and its unequal distribution throughout the world have been the source of studies on the importance of country factors in determining where foreign investors choose to invest. Our paper aims to provide a better understanding of the location factors of FDI. Based on the Investment Development Path (IDP) we study how the importance of these country factors, such as location advantage, varies depending on the degree of development of the host economy. We consider a broad set of well-known location factors (13) and we analyze them using panel data for a broad set of economies (117) over the period 2006–2013 (8 years). Our results establish that most of the location factors studied are not only decisive in attracting FDI, but also that their importance is moderated by the host economy's stage of development.