Foreign Direct Investment in the Eurasian Transition States

… Discussion Paper No. …, 2008

This paper employs a novel multi-level data set and a multinomial logit model-to examine the factors explaining 1,223 foreign investment location decisions by firms in the EU(15), Japan, Norway, Russia, Switzerland and the US in 12 Central and Eastern European countries (CEECs). The highly significant empirical results, based on a general underlying model of imperfect competition, show that the responsiveness of foreign direct investment in the CEECs to country-level variables differs significantly both across sectors and across firms of different sizes and profitability. In particular, in addition to the traditional importance of market size and distance, firm size and the effective corporate tax rate are also important for the location of investment.

The paper studies the influence of the GDP per capita on foreign direct investments (FDI) in transitional economies of Central and Eastern European states. In the literature devoted to the influence of FDI on economies, the research about the determinants of the geographical pattern of FDI distribution usually focuses on the factors that determine why some states manage to draw FDI in higher levels than some other states. However, not many studies deal with the GDP per capita as a determinant why some states (i.e. their economies) are more attractive to the FDI than others. Our research focused on the transitional economies of Central and Eastern Europe. Among the states studied, we have equally studied the EU members from Central and Eastern Europe, as well as the non-EU members. By using two variables, FDI and GDP per capita, this research will determine how much FDI correlate to the standard of living represented through GDP per capita for each state surveyed. Research results wi...

1996

First, the statistical evidence on FDI in the Central and Eastern European countries is shown. The volume of investment, the trends of capital inflow according to countries of destination and origin, and the distribution among industries are discussed. The main observations are the following : the volume of investment remained below the expected amount, Hungary attracted almost half of the investment over the whole period, whereas the Czech Republic got only the early investment. The foreign capital inflow seems to be diverted in time from the (North)-West part earlier towards the SouthEastern part of the region more recently. As far as the pattern of countries of origin is concerned, Germany is leading, followed by the US and Austria. The Far East is almost absent. As far as the industry pattern is concerned it is a far cry from the typical picture of industries which are characterised by early and a large amount of FDI. Some descriptive analysis was done on a pioneer sample of the 400 major international investors in the Visegrad-3 countries (the Czech Republic, Hungary and Poland). Investor country, industry and company determinants of foreign direct investment are dealt with. There seems to be an advantage of being near to the market, in particular for German and Austrian small to medium-sized companies. There is some interesting evidence about the role of intangible assets such as advertising and R&D, as most of the investment projects seem to be characterised by a low use of these intangible assets, but this seems to be compensated by the major investment deals which take place in industries which loyally advertise and do research. The size effect is not clear, but the sample of investors was biased towards larger projects. This puts forward some further hypotheses to investigate on whether the presence in the East is explained by market or low cost considerations and seen in a long term rather than in a short term perspective. Finally, this paper provides an overview of the theories on foreign direct investment behaviour by multinational companies. The different strands of this literature originating in international business, industrial organisation, location theory and the theory of the firm models are briefly mentioned. The emphasis is on the more recent analytical models of strategic behaviour, and, given the idiosyncrasies of the situation in Central and Eastern Europe as countries of destination of the foreign capital inflow, four major game theoretic related ways of analysis are expounded upon and criticised in the way they are inadequate to analyse FDI in the CEECs. These frameworks are: entry deterrence, waiting under uncertainty and learning from it, strategic trade policy and delocalisation. From this a tentative integration is suggested. • This work is part of the Ph.D. thesis of the author, which is financially supported by the N.F.W.O. (Belgian National Fund of Scientific Research). We would above all like to thank R. Veugelers and J. Konings. Also the help by the other members of the author's transfer committee, R. De Bondt, S. Estrin, M. Jackson and L. Sleuwaegen through very helpful encouraging comments is gratefully acknowledged, as well as the suggestions on empirical sources by K. Meyer and on analytical modelling by S. Vannini. All errors and fallacies remain ours. Comments of any kind are very welcome. Conclusion 111.2.1 Entry deterrence 111.2.2 Waiting under uncertainty and learning from it 111.2.3 Strategic trade policy 111.2.4 Union-firm bargaining and delocalisation 111.2.5 Our research agenda: a tentative integrated model Annabel Sels, research report, February 1996 I See, in view of this, also the latest ACE-report on the topic, Rojec et al. (1995). 2The IMF balance of payments yearbook requires a benchmark of 10%, which is the rule in most OECD countries.

2009

In this paper we explore the hypothesis of spatial effects in the distribution of Foreign Direct Investments (FDI) across Russian regions. We make use of a model, which describes FDI inflows as resulting from an agglomeration effect (the level of FDI in a given region depends positively on the level of FDI received by the regions in its neighbourhood) and remoteness effect (the distance of each Russian regions from the most important outflows countries). Considering a panel of 68 Russian regions over the period 2000-2004 we find that the two effects play a significant role in determining FDI inflows towards Russia. The two effects are also robust to the inclusion of other widely used explanatory variables impacting the level of FDI towards countries or regions (e.g. surrounding market potential, infrastructures, investment climate).

2021

Foreign direct investment (FDI) has been debated by many specialists being considered in most cases a source of development for the receiving countries. From this perspective the study is a comparative analysis of FDI evolution in Eastern European countries and an analysis of FDI in Romania. The analysis was carried out over a period of five years and allowed us to obtain useful information regarding the FDI volume expressed in % of GDP, FDI structure and structure of activities in Romania considered attractive for FDI, respectively FDI distribution in the regions of Romania.

2010

The present study investigates long-term developments in inward and outward FDI of 10 Central and Eastern European (CEE) countries using Dunning’s investment development path (IDP) paradigm as a theoretical framework. Its main purpose is to determine how far the CEE countries have progressed along their IDPs since the beginning of transition. The results show that half of the analyzed countries have already reached Stage 3 of the IDP, while the other half are either firmly in Stage 2 or are approaching Stage 3. With some notable exceptions, the study points to conformity of the analyzed IDP trajectories with Dunning’s model.

The aim of this paper is to analyse the relationship between the inward Foreign Direct Investment in South-eastern European countries in relation with the factors which determine the ability of a country to attract foreign investment capital. The paper begins with the definition of the main terms related with Foreign Direct Investment and literature review related with the factors which determine the regional allocation of the FDI flows. Specifically, the article focuses on the definition of the Foreign Direct Investment flows, regional attractiveness, location of FDI, as well as the factors which affect the location of FDI activities within and across countries and regions. Then, the article presents a comparative analysis of the relative position of the South-eastern European countries, as far as FDI is concerned. Moreover, the paper attempts, through a model specification and results analysis to estimate the relationship between FDI and a selection of potential determining factor...

The aim of this paper is to provide some qualitative assessment of the Foreign Direct Investment (FDI) prospects of the eight transition countries acceded to the EU on May 1 st , 2004, namely Poland, Hungary, the Czech Republic, Slovakia and Slovenia and the three Baltic states i.e. Latvia, Lithuania and Estonia. In particular it would attempt to assess the main FDI determinants for these countries after accession. During transition the eight countries have set the pace for the whole number of countries in transition favoured by close access to Western European markets, capital and know-how. All eight countries, account only for 10 % of the whole 27 transition countries population but produce 30% of the region's GDP, are responsible for about below 50 % of the region's total exports of goods and services and host above 60 % of the region's inward FDI stock (see ). In 2003 FDI inflows were 8.3 per cent of Estonia's GDP, 2.8 % of the Czech Republic's and Latvia's, and 2.6 % of Lithuania. In 2002 the same ratio was 13.4 % for the Czech Republic, 4.4 per cent for Hungary, 2.2 % for Poland, and 16.6 % for Slovakia 1 .

… Corporations, Journal of …, 2000

This paper considers the evidence that has been collected on the determinants and effects of FDI in Central and Eastern Europe, with a strong focus on Hungary, Poland and the Czech Republic. There are two main sources from which we draw information: survey studies and econometric studies. We consider how each of these can contribute to the field of research, whether they give us complementary or contradictory information, and how this information can best be exploited. We conclude that the findings of econometric studies tend to support survey results. This suggests that market seeking has been the primary motive of investors, and that the presence of foreign firms has increased productivity levels in Central Europe, but only to a limited degree.

2010

This study attempts to investigate the timing and factors involved in the development and internationalisation of six Central and East European (CEE) economies from the perspective of advancing along the investment development path (IDP) model/paradigm. It also strives to identify the differences and similarities between the individual countries' IDP trajectories and to arrive at conclusions and policy recommendations designed not only for the analysed countries but which might serve or be of interest to other European states as well. The dominating empirical part of this study is based on data derived from the UNCTAD World Investment Reports and Handbook of Statistics. The analysis covers the entire period of the six countries' transition process to the market led economic system (with the exception of the Czech Republic and Slovakia, for which data do not include the years 1990-1992 when both were functioning as Czechoslovakia) up to 2006, the last year for which the relevant data for all countries were available. The first part of the study outlines the principal components of the IDP model and presents a review of empirical studies applying and/or relating to, the IDP model in CEE. The following section compares IDP trajectories of the six selected CEE countries. The analysis is concentrated on three key issues: the timeframe and conditions of moving from IDP stage 1 to stage 2; the problems of determining the advance towards IDP stage 3 and the significance in this context of the outward foreign direct investment (FDI) performance index. The concluding section summarizes the main findings and policy implications, draws attention to their limitations and delineates future research options.