CHAPTER 1 ​ INTRODUCTION 1.1 Background Foreign Direct Investment (FDI) plays a crucial role in supporting economic growth, specifically by easing entry to foreign markets and providing capital, foreign exchange and technology (Crespo & Fontoura, 2007). Among the various determinants of FDI inflows, political stability is considered one of the most important ones, as it directly affects the perception of risk for foreign investors (Shahzad & Al‐Swidi, 2013). Conceptually, the idea that a stable political condition is suitable for investors is widely accepted, as it provides a predictable and disruption-free environment, and is therefore likely to boost growth in FDI inflows (Blouin et al., 2018; Abaidoo & Agyapong, 2021; Bremmer, 2005). However, empirical evidence is rather mixed, with some studies identifying a strong positive relationship between political stability and FDI (Rashid et al., 2017), while others imply no significant relation (Tian et al., 2017; Kurečić & Kokotović, 2017). While political stability is considered as an important determinant of FDI, it can have different nature depending on the regime types. In democratic regimes, political stability usually relies on a strong institution like independent judiciaries and legislative bodies that check executive power (Goldstone & Ulfelder, 2004). These institutions provide long-term security to investors regarding property rights, contract enforcement and fairness in regulations (Clague et al., 1996). However, democratic regimes can also face political instability, especially during the election cycle and leadership transition (Baker, 2020). Although such transitions are normally peaceful, the uncertainty on the policy that different government actors bring can be a risk to investors. In contrast, autocratic regimes often maintain stability through a mix of legitimation, repression, and co-optation (Gerschewski, 2013). This strategy enables an autocratic regime to have more centralized and consistent governance, which can be used to implement swift policy decisions and large-scale projects without opposition (Frantz & Kendall-Taylor, 2014). The predictability of governance and a straightforward investment condition is a very favorable environment for foreign investors. However, the absence of institutional checks and 12 balances in autocratic regimes may lead to the emergence of several risks such as corruption, expropriation, or insufficient legal protection for foreign investors (​​​​Bogdandy, 2020). This study examines whether political stability significantly affects FDI inflows and if its impact varies across different regime types. Using data from a total of 140 countries worldwide over a period of 10 years (2012-2022), this comparative study captures widespread political and economic conditions that could provide generalizable insights. The global sample is essential because previous studies often focus on specific regions, missing broader trends and comparisons across regime types. ​​The study findings will help investors understand better how regime type shapes up the political stability to inform decisions on foreign investment and provide valuable guidance for strategic investment planning across varied political environments. 1.2 Problem Statement Although the relationship between political stability and FDI inflows has been studied deeply, much of the literature is narrow in scope, with specific country or regional analyses, and without considering regime type as a differentiating factor. Political stability operates differently in autocratic and democratic regimes, a point that most of the existing research overlook (Goldstone & Ulfelder, 2004). For democracies, stability comes through transparent government, firm institutions, and protection of property rights that give the investor long-term security.