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Determinants of FDI in transition countries and estimation of the potential level of Croatian FDI

Author

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  • Drazen Derado

    (University of Split, Faculty of Economics, Split, Croatia)

Abstract

In a global economy, foreign direct investment (FDI) represents the main form of international business activities. More than the mere cross-border movement of capital, FDI includes transfer of technology and know-how, thus contributing to competitiveness, employment and trade, and consequently, economic growth and the development of the local economy. The recent drop in international capital flows resulting from global financial and economic crisis has caused concerns regarding growth prospects for the world economy in general and that of less advanced transition countries in particular. By hypothesizing that Croatia, as the next member of the EU, has realized sub-optimal effects in attracting FDI, and that international competition in this field is expected to grow further, the aim of the paper is to find out determining factors behind inward FDI to transition countries, in order to detect the capacities of Croatia in hosting new foreign investment. Statistical analysis, focusing on bilateral FDI-flows and country-specific characteristics, proved the importance of typical â€Ygravityâ€?-type variables, as well as those based on increasing returns to scale, while showing that at present Croatia has exhausted its potentials in hosting new FDI.

Suggested Citation

  • Drazen Derado, 2013. "Determinants of FDI in transition countries and estimation of the potential level of Croatian FDI," Financial Theory and Practice, Institute of Public Finance, vol. 37(3), pages 227-258.
    • Handle: RePEc:ipf:finteo:v:37:y:2013:i:3:p:227-258
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    Citations

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    Cited by:

    1. Jurčić Ljubo & Franc Sanja & Barišić Antea, 2020. "Impact of Institutional Quality on Foreign Direct Investment Inflow: Evidence from Croatia," Business Systems Research, Sciendo, vol. 11(1), pages 44-58, March.
    2. Matej Bule & Andrijana Cudina, 2020. "Foreign Direct Equity Investments and Foreign Ownership Premium: the Case of Croatia," Working Papers 58, The Croatian National Bank, Croatia.
    3. Iwasaki, Ichiro & 岩﨑, 一郎 & Tokunaga, Masahiro, 2019. "The Determinants and Macroeconomic Impacts of Foreign Direct Investment in Transition Economies," CEI Working Paper Series 2019-8, Center for Economic Institutions, Institute of Economic Research, Hitotsubashi University.
    4. Masahiro Tokunaga & Ichiro Iwasaki, 2017. "The Determinants of Foreign Direct Investment in Transition Economies: A Meta-analysis," The World Economy, Wiley Blackwell, vol. 40(12), pages 2771-2831, December.
    5. Daniel Francois Meyer & Lerato Mothibi, 2021. "The Effect of Risk Rating Agencies Decisions on Economic Growth and Investment in a Developing Country: The Case of South Africa," JRFM, MDPI, vol. 14(7), pages 1-17, June.
    6. Muhammad Shahbaz & Smile Dube & Ilhan Ozturk & Abdul Jalil, 2015. "Testing the Environmental Kuznets Curve Hypothesis in Portugal," International Journal of Energy Economics and Policy, Econjournals, vol. 5(2), pages 475-481.
    7. Tokunaga, Masahiro & Suganuma, Keiko & Odagiri, Nami, 2018. "From Russia to Eurasia : Specific Features of the “Russosphere” from the Perspective of Business Activities of Japanese Firms," RRC Working Paper Series 77, Russian Research Center, Institute of Economic Research, Hitotsubashi University.
    8. Nuno Carlos Leit o, 2015. "Energy Consumption and Foreign Direct Investment: A Panel Data Analysis for Portugal," International Journal of Energy Economics and Policy, Econjournals, vol. 5(1), pages 138-147.
    9. Tokunaga, Masahiro & Iwasaki, Ichiro, 2014. "Transition and FDI: A Meta-Analysis of the FDI Determinants in Transition Economies," RRC Working Paper Series 47, Russian Research Center, Institute of Economic Research, Hitotsubashi University.

    More about this item

    Keywords

    FDI; gravity equation; economies of scale; transition economies; Croatia;
    All these keywords.

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business

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