countries are taking a more creative approach to FDI regulation. Hufbauer and others (2013) analyze more than 100 local content requirements introduced in 2008‐13. They find that several depart from the classic mandated purchases from domestic suppliers, and instead mix price and quantity signals to influence market outcomes.

Most of the literature confirms that entry barriers—including performance requirements affecting the establishment of investment—can significantly inhibit FDI and trade in services. Econometric evidence examines common ownership and procedural barriers to FDI, and the most recent research targets liberalization of services. Evidence on the effects of performance requirements is based on case studies. Table 3 summarizes study findings.

Table 3. Effects of investment entry on foreign direct investment and other variables

|**Country**|**Study**|**Investor Entry Measure**<br>**Studied**|**Effect**|
|---|---|---|---|
|**Cross‐country**|Antras, Desai and<br>Foley (2009)|Removal of foreign ownership<br>restrictions|A 30‐34 percent increase in U.S. multinational<br>activity in countries with previously below‐median<br>investor protection.|
|**Cross‐country**|Borchert, Gootiiz and<br>Mattoo (2012)|Improved Services Trade<br>Restrictiveness Index from restricted<br>to open regime level|A $2.2 billion higher value of services mergers and<br>acquisitions FDI in a country and services sector over<br>seven years.|
|**Cross‐country**|Barattieri, Borchert<br>and Mattoo (2014)|Improved Services Trade<br>Restrictiveness Index in two countries<br>with different industrial structures|A 5 times larger positive impact on services mergers<br>and acquisitions FDI in a country with a 3.8 percent<br>share of manufacturing in GDP than in one with a 20<br>percent share.|
|**Cross‐country**|De la Medina Soto<br>and Ghossein (2013)|Greater openness to foreign equity<br>investment across 12 sector groups;<br>fewer number of days to establish a<br>foreign firm. Both as measured by the<br>World Bank‘s FDI Regulations<br>Database|Positive correlation with FDI flows per capita (2007‐<br>11 average). The Pearson correlation coefficient is<br>0.193; positive correlation with the percentage of<br>firms identifying business licensing and permits as<br>major constraints (as measured by the World Bank<br>Enterprise Surveys). The Pearson correlation<br>coefficient is 0.348.|
|**Cross‐country**|Wagle (2011)|Increasing by 10 percent the<br>standardized score for “FDI<br>Arbitration”; increasing by 10 percent<br>the standardized score for “Number<br>of Procedures”|Increases FDI stock by at least 4 and 5 percent<br>respectively.|
|**India**|Arnold and others<br>(2012)|One standard deviation increase in<br>the aggregate index of services<br>liberalization|Increased productivity of domestic firms by 11.7<br>percent and of foreign enterprises by 13.2 percent.|

# _a. Ownership and procedural barriers across sectors_

De la Medina Soto and Ghossein (2013) analyze the 2012 World Bank Foreign Direct Investment Regulations’ indicators for 103 economies. Although the study does not address causality, it finds a positive correlation between average openness to foreign equity investment across sectors and per capita FDI inflows. Further, they find a positive association between the number of days needed to establish a foreign firm and the percentage of firms identifying business licensing and permits as a major constraint.

Antras, Desai, and Foley (2009) find that U.S. multinational firms increased affiliate sales and investments in countries that liberalized ownership restrictions in the 1990s (such as Argentina in 1990, Colombia in 1992, and Mexico in 1990). The effect of entry liberalization, in particular the elimination of joint venture 18