Domestic human capital is definitely a determinant of foreign direct investment (FDI) inflows for the developing world. Yet, the contribution of human capital will depend to a great extent on the institutional framework of a nation. Good political rights and civil liberties favour human capital to reap the benefits of FDI inflows more efficiently. Our paper shows that the interlinkages between FDI, human capital and institutions play a very important role in explaining FDI inflows to developing countries. The results show that in the presence of good political rights and civil liberties, the association between human and FDI inflows is enhanced. Copyright © 2010 John Wiley & Sons, Ltd.