Foreign Direct Investment in Central and Eastern European Countries : The Role of Institutional Reforms
AbstractDespite increasing flows of foreign direct investment (FDI), an important gap still exists between FDI toward Central and Eastern European countries (CEECs) and their actual needs to support structural adjustment. Using a Cournot duopoly model with a profit-maximizing foreign-based multinational (MNE) and a local labour-managed firm, I show that insufficient advancement in ‘marketization’ and regulatory framework inadequacy are major elements deterring FDI. I conclude that the creation of market-oriented infrastructures would be welcome, and that the European Union should have a role in inducing CEEC governments to commit to reforms in exchange of firmer prospects of membership.
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Bibliographic InfoPaper provided by Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES) in its series Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) with number 1995024.
Date of creation: 01 Dec 1994
Date of revision: 14 Jul 1995
multinational firm; mixed duopoly; build vs. buy; reforms; wage differential;
Find related papers by JEL classification:
- F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
- L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- P13 - Economic Systems - - Capitalist Systems - - - Cooperative Enterprises
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- Carlo Altomonte, 1998. "FDI in the CEEC's and the Theory of Real Options: An Empirical Assessment," LICOS Discussion Papers 7698, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
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