the contributions of IPAs are likely to be more pronounced in developing countries, where investors may know less about the location, struggle to obtain reliable information, find the regulatory environments more challenging, and encounter further obstacles stemming from institutional and cultural differences between the investors’ home and host markets (Harding and Javorcik 2011, 2012).

Empirical evidence generally shows that IPAs can play a significant role in attracting and growing FDI in developing countries (Charlton and Davis 2007; Cho 2003; Crescenzi, Di Cataldo, and Giua 2019; Morisset and Andrews-Johnson 2004; Bezuidenhout & Pietersen 2015). Relatedly, Harding and Javorcik (2012) found that IPA-promoted sectors experienced 155 percent higher FDI inflows and 68 percent higher employment relative to non-targeted sectors. IPAs can also bolster the quality of FDI by supporting technology transfer, knowledge spillovers, and export growth (Freund and Moran 2017; Moran, Gorg, and Krieger-Boden 2018).

# **_Gaps in the literature_**

While the general importance of countries’ legal and regulatory environments and investment promotion activities is well-explored in the literature, gaps related to specific policy areas and heterogeneity across types of affiliates remain. For example, some researchers argue that factors influencing FDI may vary by sector, especially between manufacturing and services (Erramilli and Rao 1993; Tatoglu and Glaister 1998). Some studies also suggest that younger and older companies behave differently (Jimenez 2011). Nevertheless, heterogeneity remains an understudied topic given the scarcity of reliable data on FDI flows by sector. In addition, existing studies generally examine overall indices of policy and institutional quality and often do not study specific policy levers in detail; more granular approaches would be helpful to aid government policy design.

This paper builds upon the existing literature via a survey-based approach that distinguishes between specific policy areas. High-level survey findings are used to validate or question prevailing findings in the literature regarding the effect of countries’ legal and regulatory environments, and investment promotion on FDI attraction. In addition, by gathering data on respondent profiles, survey data allow us to examine heterogeneity in investors’ preferences and decision-making criteria across a wide variety of affiliate dimensions, including affiliate size, age, broad sector, and trading activity. Finally, by asking respondents about specific policy areas, the survey can provide insight into the areas that truly matter to investors beyond simple claims of policies’ general importance as a whole.

# **3. DATA**

The analyses in this paper draw upon the results of the 2019 Global Investment Competitiveness (GIC) Survey (survey), a survey of executives of the affiliates of multinational enterprises (MNEs) in developing countries. The survey data cover more than 2,400 foreign investors with operations in 10 middle-income countries: Brazil, China, India, Indonesia, Malaysia, Mexico, Nigeria, Thailand, Turkey, and Vietnam. The 10 countries covered by the survey account for more than half of the global population, one-quarter of global GDP, and one-fifth of global trade. From an FDI perspective, they accounted for over a third of global inflows (37 percent) and three-fourths (75 percent) of inflows to developing countries in 2018.

The survey was conducted using 30-minute phone interviews in the primary business language(s) of the host economies. The interviews were conducted between June and November 2019. The survey was administered to senior executives of foreign-owned affiliates who possess a broad understanding of 4