Follow the people and the money: Effects of inward FDI on migrant remittances and the contingent role of new firm creation and institutional infrastructure in emerging economies

We explore how inward Foreign Direct Investment (FDI) influences migrant remittances in forty-six emerging economies. We develop and test new theory that not only explains the mechanisms underlying the above relationship, but also helps us understand how entrepreneurial migrants and investments made by multinational enterprises serve as foundations and determinants of remittances in recipient countries. The empirical evidence supports our hypotheses that inward FDI increases remittances, and that the relationship is positively mediated by new firm creation and negatively moderated by institutional infrastructure in recipient countries (namely, governance and corruption). Policy implications and avenues for new research are discussed.