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The Motives and Impediments to FDI in the CIS

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  • Malgorzata Jakubiak
  • Alina Kudina
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    Abstract

    This paper examines the motives behind foreign direct investment (FDI) in a group of four CIS countries (Ukraine, Moldova, Georgia and Kyrgyzstan) based on a survey of 120 enterprises. The results indicate that non-oil multi-national enterprises (MNEs) are predominantly oriented at serving local markets. Most MNEs in the CIS operate as 'isolated players', maintaining strong links to their parent companies, while minimally cooperating with local CIS firms. The surveyed firms secure the majority of supplies from international sources. For this reason, the possibility for spillovers arising from cooperation with foreign-owned firms in the CIS is rather low at this time. The lack of efficiency-seeking investment poses further concern regarding the nature of FDI in the region. The most significant problems identified in the daily operations of the surveyed foreign firms are: the volatility of the political and economic environment, the ambiguity of the legal system and the high levels of corruption.

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    File URL: http://www.case-research.eu/upload/publikacja_plik/21937224_sa370.pdf
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    Bibliographic Info

    Paper provided by CASE-Center for Social and Economic Research in its series CASE Network Studies and Analyses with number 0370.

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    Length: 31 Pages
    Date of creation: 2008
    Date of revision:
    Handle: RePEc:sec:cnstan:0370

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    Related research

    Keywords: FDI; CIS; industrial organization; investment motives;

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    1. Carstensen, Kai & Toubal, Farid, 2004. "Foreign direct investment in Central and Eastern European countries: a dynamic panel analysis," Journal of Comparative Economics, Elsevier, vol. 32(1), pages 3-22, March.
    2. Beata Smarzynska Javorcik & Mariana Spatareanu, 2003. "To share or not to share : does local participation matter for spillovers from foreign direct investment?," Policy Research Working Paper Series 3118, The World Bank.
    3. Johnson, Andreas, 2006. "FDI inflows to the Transition Economies in Eastern Europe: Magnitude and Determinants," Working Paper Series in Economics and Institutions of Innovation 59, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    4. Kelly Edmiston & Shannon Mudd & Neven Valev, 2003. "Tax Structures and FDI: The Deterrent Effects of Complexity and Uncertainty," Fiscal Studies, Institute for Fiscal Studies, vol. 24(3), pages 341-359, September.
    5. M. Taner Yigit & Ali M. Kutan, 2004. "Effects of Transition and Political Instability on Foreign Direct Investment Inflows : Central Europe and the Balkans," Departmental Working Papers 0407, Bilkent University, Department of Economics.
    6. Bevan, Alan A. & Estrin, Saul, 2004. "The determinants of foreign direct investment into European transition economies," Journal of Comparative Economics, Elsevier, vol. 32(4), pages 775-787, December.
    7. Beata Smarzynska Javorcik, 2004. "Does Foreign Direct Investment Increase the Productivity of Domestic Firms? In Search of Spillovers Through Backward Linkages," American Economic Review, American Economic Association, vol. 94(3), pages 605-627, June.
    8. Josef C. Brada & Ali M. Kutan & Taner M. Yigit, 2006. "The effects of transition and political instability on foreign direct investment inflows," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 14(4), pages 649-680, October.
    9. Elina Ribakova & Balázs Horváth & Dimitri G. Demekas & Yi Wu, 2005. "Foreign Direct Investment in Southeastern Europe," IMF Working Papers 05/110, International Monetary Fund.
    10. Campos, Nauro F & Kinoshita, Yuko, 2003. "Why Does FDI Go Where it Goes? New Evidence from the Transitional Economies," CEPR Discussion Papers 3984, C.E.P.R. Discussion Papers.
    11. Melanie Lansbury & Nigel Pain & Katerina Smidkova, 2004. "Foreign Direct Investment in Central Europe Since 1990: An Econometric Study," Macroeconomics 0404002, EconWPA.
    12. Yadong Luo & Mike W Peng, 1999. "Learning to Compete in a Transition Economy: Experience, Environment, and Performance," Journal of International Business Studies, Palgrave Macmillan, vol. 30(2), pages 269-295, June.
    13. Josef C. Brada & Ali M. Kutan & Taner M. Yigit, 2004. "The Effects of Transition and Political Instability On Foreign Direct Investment Inflows: Central Europe and the Balkans," William Davidson Institute Working Papers Series wp729, William Davidson Institute at the University of Michigan.
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