| Summary: | Foreign Direct Investment (FDI) is one of the key factors enhancing economic growth. In this paper, we study the possible determinants of FDI, specifically institutional readiness in terms of Intellectual Property Rights (IPR) protection and the size of informal economy. Twelve OECD countries (source) and forty-eight developing countries (host), generating a total of 1603 observations, across the regions of Africa, South America, and Asia are included in the study over the period of 2000 to 2007. Our hypothesis is that strong IPR protection and a small informal economy in the host country will attract greater inward FDI from the source country. The empirical results, however, highlight different factors affecting FDI inflows to the different regions. In particular, IPR protection is significant in Africa, while the size of informal economy matters most in South America. In Asia, the domestic GDP is the most significant.
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