Political Culture and Foreign Direct Investment: The Case of Italy

Posted: 20 Dec 2001

See all articles by Ram Mudambi

Ram Mudambi

Temple University - Department of Strategic Management

Pietro Navarra

University of Messina - Institute of Economics and Finance; London School of Economics & Political Science - CPNSS

Abstract

Does the political culture of an area have any impact on the foreign direct investment (FDI) decisions of multinational corporations (MNCs)? This question is difficult to address empirically, as locations differ in many dimensions. We therefore address this question by examining MNC investment location decisions with regard to different regions within a single country. The country we examine is Italy, which exhibits one of the highest levels of variation with regard to the political culture of its geographical regions. We find that political culture as represented by the pattern of support for political parties at different points on the political spectrum has a significant impact on the MNC investment location decision. Thus, in choosing between locations on a short list, where economic and financial location factors are roughly similar, political culture can have a determining influence. In the case of Italy, a Center-right orientation is conducive to MNC FDI, while a Center-left orientation is not. A Far-left orientation is found to have a very negative effect on FDI.

Keywords: Foreign direct investment, political culture, MNCs

JEL Classification: F23, D72, D73

Suggested Citation

Mudambi, Ram and Navarra, Pietro, Political Culture and Foreign Direct Investment: The Case of Italy. Available at SSRN: https://ssrn.com/abstract=291962

Ram Mudambi (Contact Author)

Temple University - Department of Strategic Management ( email )

Fox School of Business and Management
Philadelphia, PA 19122
United States
215-204-2099 (Phone)
215-204-8029 (Fax)

HOME PAGE: http://sbm.temple.edu/~rmudambi/index.html

Pietro Navarra

University of Messina - Institute of Economics and Finance ( email )

Piazza Pugliatti 1
Messina
Sicilia, 98122
Italy
39-090-676-4446 (Phone)
39-090-292-0014 (Fax)

London School of Economics & Political Science - CPNSS ( email )

Houghton Street
London, WC2A 2AE
United Kingdom
44-207-955-6820 (Phone)

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