Journal of Contemporary Issues in Business and Government

Abstract

Institutional quality (IQ)has gained much attention in institutional economics literature – it
appears as the fundamental pillar for economic development. Literature on foreign direct
investment (FDI) response to IQ has examined the symmetric association of this connection,
while there is a probability of the existence of asymmetries.This study adds to the FDI literature
by investigating the symmetric and asymmetric effects of IQ on sectoral FDI in China.Using the
ARDL and NARDL techniques on quarterly data, we find that IQ has both thesymmetric and
asymmetric effects on FDI. This offers useful policy input for stakeholder – importantly, to
carefully contemplate the policy refinement based on symmetric dynamics unless asymmetric
directions are not examined.