This paper examines the impact of institutional quality on foreign direct investment (FDI) in developing countries. It contributes to the empirical literature by re-examining the role of governance infrastructure in both the host and source countries using a gravity equation for bilateral FDI stocks, incorporating governance indicators. The study addresses multicollinearity and endogeneity issues through systematic comparisons, two-stage estimations, and instrumental variables. It also uses the Institutional Profiles database from the French Ministry of Finance to detail the relevant institutional features and compares results with other databases. The paper finds that institutions significantly influence FDI independently of GDP per capita, with public efficiency, tax systems, ease of doing business, lack of corruption, transparency, contract law, property rights security, and competition playing crucial roles. While "good" institutions generally increase FDI, no general rule applies to outward FDI. Panel data regressions show that institutional distance tends to reduce bilateral FDI, though results are mixed. These findings suggest that improving institutional quality can attract more FDI, potentially accelerating growth and development in developing countries.This paper examines the impact of institutional quality on foreign direct investment (FDI) in developing countries. It contributes to the empirical literature by re-examining the role of governance infrastructure in both the host and source countries using a gravity equation for bilateral FDI stocks, incorporating governance indicators. The study addresses multicollinearity and endogeneity issues through systematic comparisons, two-stage estimations, and instrumental variables. It also uses the Institutional Profiles database from the French Ministry of Finance to detail the relevant institutional features and compares results with other databases. The paper finds that institutions significantly influence FDI independently of GDP per capita, with public efficiency, tax systems, ease of doing business, lack of corruption, transparency, contract law, property rights security, and competition playing crucial roles. While "good" institutions generally increase FDI, no general rule applies to outward FDI. Panel data regressions show that institutional distance tends to reduce bilateral FDI, though results are mixed. These findings suggest that improving institutional quality can attract more FDI, potentially accelerating growth and development in developing countries.