The present study examines the effect of institutions on the location choice of foreign direct investment (FDI) using a novel dataset for bilateral FDI of India. My study follows prior works to argue that institutions have a positive association with FDI. The study considers three widely used institutional pillars namely state judiciary system, bureaucracy system, and property right protection to examine the effect of institutions on location choice of FDI. The study extends prior works focusing on the influence of firms’ heterogeneity on the connection between institutions and FDI using the gravity model. The study finds that institutions have a significant and positive impact on the location choice of FDI. The results reveal that institution of developed regions is positively associated with FDI. But surprisingly, there is a negative association between institutions of the developing region and FDI. I put the firms into four separate bins according to their size to capture the firms’ heterogeneity. Results show that large-sized firms are more likely to invest in countries with good institutions.

本研究使用印度双边 FDI 的新数据集研究机构对外国直接投资 (FDI) 区位选择的影响。我的研究遵循先前的工作，认为机构与 FDI 存在正相关。该研究考虑了三个广泛使用的制度支柱，即国家司法制度、官僚制度和产权保护，以检验制度对 FDI 区位选择的影响。该研究扩展了先前的工作，重点关注公司异质性对使用引力模型的机构和 FDI 之间联系的影响。研究发现，机构对 FDI 的区位选择具有显着的积极影响。结果表明，发达地区制度与 FDI 呈正相关。但令人惊讶的是，发展中地区的机构与外国直接投资之间存在负相关。我根据公司的规模将它们分为四个独立的箱体，以捕捉公司的异质性。结果表明，大型企业更有可能投资于制度完善的国家。