Impact of the business environment and tax incentives on new investments: Evidence from developing countries

Abstract

This research aims to measure the impact of the business environment and tax incentives on new investments in Kosovo. A questionnaire created especially for this study was submitted to 104 companies that have invested in Kosovo during the period 2018–2020. It is designed to be as comprehensible and accessible as possible and is divided into an introduction that provides demographic data of the respondent, and types of surveyed businesses, to go through the questions related to new investments, and business environment, and the last section contains questions related to tax incentives. The reliability of the questionnaire is measured by Cronbach’s alpha. In terms of the methodology, a multifactorial regression model and correlation analysis are employed. Based on the multiple regression model, the research results show that the independent variables, such as business environment and tax incentives, have a significant positive impact on the dependent variable, new investments. Furthermore, the correlation analysis between new investments and tax incentives also indicates a strong positive relationship. Additionally, the business environment and tax incentives are the main factors attracting new investments. The results of this study can help to enhance the business climate and boost tax incentives, demonstrating Kosovo’s suitability as a location for new investments. There remains the duty of the government and policymakers to create mechanisms that ensure sustainable business conditions and applicable tax incentives.