This article analyses the stable connection between the type and quality of institutions, on the one hand, and foreign direct investments (FDI), on the other hand, emphasizing their impact on the economic development of states. The article presents a different perspective by explaining economic development, detailing the duality of institutions: from inclusive to extractive, and the influence exerted on FDI flows. A multidisciplinary approach is used in the analysis, intersecting concepts from economics, political science, and sociology. The research captures the role of economic stability, the burden of government regulations, or public funds management, assessing the quality of institutions that can either stimulate or hinder FDI flows, with the final impact reflected in the economic development of a state. Through a case study, the article illustrates how inclusive institutions generate substantial FDI flows that support economic development, while extractive institutions destabilize the investment climate and discourage economic development. The conclusions of this article provide valuable insights for studying institutional quality in shaping the economic development of states. The research contributes to understanding an increasingly prevalent international reality: the role of institutions in the global economy, highlighting the potential of inclusive institutions as a catalyst for development in the 21st century.
