There are numerous studies in the literature that have concentrated on the role of governance on inward FDI. The studies examining the role of governance on outward FDI or considering governance as a determinant of outward FDI are limited (Globerman et. al., 2006; Witt and Lewin, 2007; Kayam, 2009; Das, 2013; Subasat and Bellos, 2013; Klimek, 2015). Also, there are other studies in the literature analyzing the effect of host country governance on outward FDI of home countries such as Mishra and Daly (2007). This type of studies is not included in the empirical survey.
Globerman et. al. (2006) found statistically significant positive effect of governance on outward FDI in both emerging and transition European economies and emerging markets for the period 1995-2001. They used principal component analysis of six main WGI governance variables as a proxy for overall governance performance of the countries. They had only three-year data for each governance indicator, hence they extrapolated them which may lead to biased results since 57% of governance data were extrapolated.