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Is There an East-West Structure in the Location of FDI in Europe? The Role of Institutions and Political Risk

Author

Listed:
  • Alfredo Jiménez

    (University of Burgos)

  • Juan Fuente

    (University of Burgos)

  • Juan Durán

    (Autonomous University of Madrid)

Abstract

The accession of new countries from Eastern Europe to the European Union represents one of the most significant challenges currently facing this political institution. With respect to foreign direct investment (FDI), this enlargement should promote and attract investment and lead to greater uniformity in the factors that motivate it. However, when decisions are taken over FDI location, it cannot be affirmed yet that no differences exist in relation to the region to which the country belongs. This paper, by using a Nested Logit Model and a Conditional Logit Model, studies the existence of an East-West structure in the location of FDI, perceived by multinational enterprises (MNEs) from a late investor country in Europe. The results confirm the existence of such a regional distinction and also the role of political risk, the quality of institutions and host country macroeconomic variables; such as GDP growth, unemployment and population.

Suggested Citation

  • Alfredo Jiménez & Juan Fuente & Juan Durán, 2011. "Is There an East-West Structure in the Location of FDI in Europe? The Role of Institutions and Political Risk," Research in Economics and Business: Central and Eastern Europe, Tallinn School of Economics and Business Administration, Tallinn University of Technology, vol. 3(1).
    • Handle: RePEc:ttu:rebcee:6
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    Cited by:

    1. Jesús Cuaresma & Harald Oberhofer & Gallina Vincelette, 2014. "Institutional barriers and job creation in Central and Eastern Europe," IZA Journal of European Labor Studies, Springer;Forschungsinstitut zur Zukunft der Arbeit GmbH (IZA), vol. 3(1), pages 1-29, December.
    2. World Bank, 2013. "EU11 Regular Economic Report, Issue #27, June 2013," World Bank Publications - Reports 16527, The World Bank Group.
    3. Ghahroudi Mehdi Rasouli & Chong Li Choy, 2020. "The Macroeconomic Determinants and the Impact of Sanctions on FDI in Iran," Economics and Business, Sciendo, vol. 34(1), pages 15-34, February.
    4. Oberhofer, Harald & Vincelette, Gallina A, 2013. "Determinants of job creation in eleven new EU member states : evidence from firm level data," Policy Research Working Paper Series 6533, The World Bank.

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