Contextual analysis of legal systems and their impact on trade and foreign direct investment

Differences among nations in legal tradition play a role in foreign direct investment decisions by multinational firms. How large a role and to what degree these factors impact the success of foreign direct investment are important issues for examination. A principal question is whether macro-differ...

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Bibliographic Details
Published in:Journal of business research 2014-10, Vol.67 (10), p.2207-2211
Main Authors: Czinkota, Michael R., Skuba, Charles J.
Format: Article
Language:English
Subjects:
Civil law
Common law
Contextual analysis
Corruption
Cross-border acquisitions
Curative marketing
Decision analysis
Embeddedness
Foreign direct investment
Foreign investment
International trade
Law
Legal studies
Legal tradition
Location analysis
Multinational corporations
Multinational enterprises
Profitability
Theocracy
Transparency
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Summary:Differences among nations in legal tradition play a role in foreign direct investment decisions by multinational firms. How large a role and to what degree these factors impact the success of foreign direct investment are important issues for examination. A principal question is whether macro-differences in legal systems are causal for international investment on a stand-alone basis or subordinate to multiple other legal variations and societal considerations. This article examines the historical roots and nature of varying legal systems, traditions, and cultures that continue to affect international business. The study analyzes other major conditions which surround the legal environment in investment target countries such as system transparency, degree of corruption, adequate enforcement, and issues of bias related to foreign-owned firms. In addition, firms may have varying strategic objectives for foreign direct investment which may not be driven by short term profitability.
ISSN:0148-2963
1873-7978
DOI:10.1016/j.jbusres.2014.01.005