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New Evidence on FDI Determinants: An Appraisal Over the Transition Period

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  • Yulia Gorbunova
  • Davide Infante
  • Janna Smirnova

Abstract

The aim of this work is to provide new evidence on the factors that determine the flow of FDI among transition countries. The analysis takes into consideration the period of most intense transition and post-transition (1994-2002) of 26 former socialist countries. The empirical estimates enable us to draw two main conclusions: first classical locational FDI factors maintain their role in the context of transition countries, and, second, that FDI are influenced by specific market and institutional factors. Among market variables, relatively higher labour costs surprisingly do not constitute an obstacle for foreign investment. We fi nd that variables reflecting market stabilising institutions play a more important role than those representing market creating institutions. Although, there is a certain tolerance of foreign investors towards weak institutional environment, we demonstrate that, to attract FDI, countries should reinforce their macroeconomic stability by focusing on market stabilising institutions.

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Bibliographic Info

Article provided by University of Economics, Prague in its journal Prague Economic Papers.

Volume (Year): 2012 (2012)
Issue (Month): 2 ()
Pages: 129-149

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Handle: RePEc:prg:jnlpep:v:2012:y:2012:i:2:id:415:p:129-149

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Related research

Keywords: transition countries; market institutions; foreign direct investment;

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References

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Cited by:
  1. Andrzej CieŚlik, 2013. "Determinants of the Location of Foreign Firms in P olish Regions: Does Firm Size Matter?," Tijdschrift voor Economische en Sociale Geografie, Royal Dutch Geographical Society KNAG, vol. 104(2), pages 175-193, 04.

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