The joint effect of economic incentives and institutions on foreign direct investment (FDI)

a country may substitute the lack of good institutions with significant incentives to foreign investors to offset the element of risk. However, this will be costly to the country.

The number of special economic zones incentives and FDI inflow among GCC countries addresses the idea that incentives have a limit; that is the incentive encourages FDI inflows for a certain maximum limit and then offering more incentives will not increase the FDI inflows.