A study on the moderating role of national absorptive capacity between institutional quality and FDI inflow: evidence from developing countries

Numerous studies on foreign direct investment (FDI) as a prime element of capital flow and external finance contribute to physical stock capital, knowledge spillovers, transfer technology, recipient countries’ employment. Developing economies need FDI boost their economic growth. This study explores the moderating role national absorptive capacity between inflow institutional quality (control corruption, government effectiveness, political stability absence violence, regulatory quality, rule law, voice accountability) panel 113 developing countries for 2000–2019. Hausman fixed-effect random-effect estimation are used in analysis. The results show that (AC) moderates relationship dimension. To check robustness, we formed an index (OIQ) dimensions through principal component analysis (PCA) regressed, demonstrating AC OIQ FDI. Subsequently, taking BRICS + Pakistan sample, find hold. will help form FDI-friendly policy countries.