National orientation to foreign investment: A cross-national quantitative analysis

Previous research on the relationship between host countries and multinational enterprises has failed to adequately theorize about host country actions and has focused too narrowly on expropriation. This study presents a state-centric model of national orientation toward foreign investment that attributes variation in policy to three factors: a country's position in the international economy, the state's domestic political capacities and economic involvements, and its political culture. The model incorporates themes from political risk analysis and from research on state theory. The operationalization of host country orientation toward multinational corporations evaluates a wide range of policies enacted to control firm actions. To test the theory the set of policies is statistically analyzed and reduced to a single measure of orientation. An effort to validate the importance of policies relative to other kinds of political risks indicates that firms do base their investment decisions on the basis of regulatory climate. The theory of national orientation is empirically tested with a cross-national data base.