A Research of Factors Affecting Foreign Direct Investments Using Multivariate Statistical Methods

Foreign investments are examined in two parts, namely direct and indirect foreign investments.Indirect foreign investments are expressed as hot money or portfolio investments from one country to another; and also foreign direct investments are investments made by international investors in a country by establishing production facilities such as factories, opening branches, acquiring a building or purchasing an existing company in whole or in part. With the effect of globalization, information, services and capital movements have gained momentum among countries, and as a result of this, the effect of globalization on the growth and development process of countries has become prominent. Foreign direct investments bring new technology and provide permanent social and economic benefits to the investing countries. In this study, the macroeconomic, social and institutional variables, particularly the democracy index and the transparency index that emphasized having an effect on foreign direct investments in the literature were evaluated using multivariate statistical methods instead of an econometric point of view. The study is based on the World Bank 2014 dataset and involves three country groups namely, OECD, Middle East and Latin American countries.In the first phase of the study, the units were taken as variables and the relationship between various macroeconomic, social and institutional variables were investigated considering the three country groups using a multidimensional scaling technique. In the second stage, homogeneous country groups were determined by cluster analysis. According to the findings, variables affecting the foreign direct investment for the Middle East and Latin American countries are institutional variables namely, political stability, level of corruption and democracy. Considering the variables affecting Foreign direct investment, the pattern of Turkey is similar to some of the Middle Eastern countries namely Jordan, Lebanon, Israel and Tunisia as well as OECD country Korea