Friend or Foe? On the role of institutional reforms in the investment development path of Central and East European economies (original) (raw)

Foreign investment location and institutional development in transition economies

International Business Review, 2004

Institutions are widely regarded as a crucial locational advantage of host countries aiming to attract foreign investors. However, there is little agreement on which institutions matter, and why. This study contributes to filling this gap by analyzing the impact of different dimensions of the newly created institutional framework in East European transition economies on foreign direct investment (FDI).

The determinants of foreign direct investment inflows in the Central and Eastern European Countries: The importance of institutions

Communist and Post-Communist Studies, 2013

This study investigates the determinants of FDI inflows in six Central and Eastern European countries (CEEC) by incorporating the traditional factors and institutional variables over the 1996–2009 period. The study identifies whether and how these determinant factors differ across four investor countries (EU-15, the US, China, and Japan). The results verify the positive and economically significant role of GDP size, trade openness, EU membership, and institutions (measured by economic freedoms, state fragility, political rights, and civil liberties indices) on FDI inflows. The results also reveal the existence of notable differences in the determinant factors across four investor countries.

Institutional, economic and regional determinants of foreign direct investments in the Balkan, Central European and ex-Soviet transition economies

2010

The study focused on the transition economies of South Eastern Europe, Central Europe and those of the ex-Soviet countries, during the period 1990-2005. The main research aims included the identification of the distinct FDI features, the research for FDI determinants and the relation between FDI and the host countries’ institutions with a particular emphasis on corruption and poor governance phenomena. Additional to that the study shed light on the impact of transition process reforms on FDI. The research employed a variety of different data sources and empirical methods, in order to achieve its goals. The empirical analysis indicated that foreign investments in the area of interest were not particularly affected by the presence of corruption. Actually, foreign investors were rather encouraged by both high corruption and the low governance levels. Regarding FDI features, the formulated view is of foreign investments as business entities with secured financial support, export orienta...

The investment development path in a globalised world: implications for Eastern Europe

2010

This article summarises recent revisions to the investment development path (IDP) as postulated by Narula and Dunning (2010). The IDP provides a framework to understand the dynamic interaction between foreign direct investment (FDI) and economic development. The revisions take into account some recent changes in the global economic environment. This paper argues that studies based on the IDP should adopt a broader perspective, encompassing the idiosyncratic economic structure of countries as well as the heterogeneous nature of FDI. It is critical to understand the complex forces and interactions that determine the turning points in a country's IDP, and to more explicitly acknowledge the role of historical, social and political circumstances in hindering or promoting FDI. We discuss some of the implications for Eastern European countries and provide some guidelines for future research.

The Nexus Between Institutional Factors and Foreign Direct Investments in Developing Countries in Europe

Knowledge International Journal

This paper tries to analyze the effects of institutional factors that affect FDI on developing economies in Europe by utilizing dynamic panel methodology, having into consideration the persistence of the endogeneity issues. Moreover, four institutional factors have been determined affecting the FDI in 15 developing European countries, analyzed for the time period 2004 – 2016.In addition, empirical results show that Control of Corruption; Political Stability, and Doing Business, have significant effect on attracting FDI on these transition countries, while Rule of Law has shown to be insignificant in attracting FDI flows in these countries.Further, such findings will contribute to the existing literature by using these institutional measures to value their impact on FDI attractiveness on European developing economies.

Inward FDI in 7 Transitional Countries of South Eastern Europe: A quest of Institution

Eastern Journal of European Studies, 2010

The main question we address is whether the weak FDI level in the SEE-7 is linked to ill-adapted institutions or not. In order to answer it, we need to understand the role of institutions in shaping a strong localization advantage for FDI. We develop a theoretical framework to understand the relationship between Transition, Institutions and inward FDI. We assume that the ability to attract FDI depends on the local institutional arrangement. We present our pattern of institutional arrangement that may help us understand why, in spite of identical institutions, countries attract a different level of FDI. We split the SEE into two categories of host countries, each category being characterized by a specific institutional arrangement and level of FDI. We conclude with the relevance of our proposition to develop an analytical framework where FDI is the outcome of a new and well-adapted institutional arrangement.

Inward FDI in the transitional countries of South-eastern Europe: a quest of institution-based attractiveness

HAL (Le Centre pour la Communication Scientifique Directe), 2010

The main question we address is whether the weak FDI level in the SEE-7 is linked to ill-adapted institutions or not. In order to answer it, we need to understand the role of institutions in shaping a strong localization advantage for FDI. We develop a theoretical framework to understand the relationship between Transition, Institutions and inward FDI. We assume that the ability to attract FDI depends on the local institutional arrangement. We present our pattern of institutional arrangement that may help us understand why, in spite of identical institutions, countries attract a different level of FDI. We split the SEE into two categories of host countries, each category being characterized by a specific institutional arrangement and level of FDI. We conclude with the relevance of our proposition to develop an analytical framework where FDI is the outcome of a new and well-adapted institutional arrangement.

Inward FDI in seven transitional countries of South-Eastern Europe: a quest of institution-based attractiveness

2010

The main question we address is whether the weak FDI level in the SEE-7 is linked to ill-adapted institutions or not. In order to answer it, we need to understand the role of institutions in shaping a strong localization advantage for FDI. We develop a theoretical framework to understand the relationship between Transition, Institutions and inward FDI. We assume that the ability to attract FDI depends on the local institutional arrangement. We present our pattern of institutional arrangement that may help us understand why, in spite of identical institutions, countries attract a different level of FDI. We split the SEE into two categories of host countries, each category being characterized by a specific institutional arrangement and level of FDI. We conclude with the relevance of our proposition to develop an analytical framework where FDI is the outcome of a new and well-adapted institutional arrangement.

Foreign direct investment and government policy in Central and Eastern Europe

International Business and Government Relations in the 21 st Century, 2005

The 1990s have been a period of extraordinary politics in Central and Eastern Europe (CEE). This chapter discusses how the transition from state to market has created bureaucratic barriers to entry, but also windows of opportunity for foreign direct investment (FDI). The high costs and high investment risks associated with FDI in CEE are a reflection the institutional development. Thus, inflows of FDI have been largest in those countries that made most progress in establishing a market-oriented institutional framework.

Institutional Foundations of Economic Transformations in Central and Eastern Europe (1990-2000)

2004

Theorizing market transition, the orthodox economic perspective stipulates that markets will emerge spontaneously once the control of the party-state is abolished and the incentive structure is put in place for self-interested actors to exchange and maximize utility. The institutional perspective emphasizes the role of states, politics and path dependency on creation and operation of markets. The study uses originally collected data on foreign direct investment (FDI) in eleven Central and East European countries since 1989 to examine the proliferation of market-exchange. Pooled cross-sectional time series analysis shows that economic incentives and stabilization in host countries contribute little to explaining the inflow of FDI into Central and Eastern Europe. Similarly, instituting democratic order in post-socialism is not significantly related to the speed of marketization. However, the direct involvement of post-socialist states in the economic transformation is crucial. The ext...