How do factors such as corruption perception and the level of democracy influence foreign direct investment to developing economies? The authors of this paper suggest that less corrupt countries and less democratic countries receive more foreign direct investment. What could account for this pattern of investment? This paper is the first to show that perceptions of corruption are highly correlated with indices of economic freedom, but uncorrelated with indices of political freedom. Hence less corrupt countries which provide the right kind of economic environment for investors, such as personal property protection, the right to move capital in and out of the country, or the ability to trade openly in world markets receive more FDI flows. At the same time, while democratic countries ensure provision of political and civil rights for citizens, these are not an automatic guarantee of economic freedoms. In fact, the correlation between the democracy index and these indices of economic freedom is surprisingly low.