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Distance as Determinant of FDI in Transition Countries. The Case of Serbia

In: Economic and Financial Challenges for Balkan and Eastern European Countries

Author

Listed:
  • Dimitrios Kyrkilis

    (University of Macedonia)

  • Natasa Grujic

    (University of Macedonia)

Abstract

The aim of this paper is to define the meaning and the role of distance in determining cross-border investment transactions. Specifically, it aims to use Serbia as an individual country case demonstrating the implementation of a model based on Ghemawat’s culture, administrative, geographic, and economic distances (CAGE) framework for testing the key distance-related determinants of the foreign direct investment (FDI) inflows to a country. Since 2000, Serbia has embarked on an extensive political and economic reforms program, having achieved democratic stability by now. Its economic growth has been mainly driven by foreign direct investments. This paper analyzes how each one of distance dimensions, i.e., cultural, administrative, geographic, and economic, affects FDI inflows to Serbia. The empirical application of the model shows that cultural distance affects FDI flows negatively, while administrative, geographic, and economic distances have a positive effect on FDI inflows to Serbia.

Suggested Citation

  • Dimitrios Kyrkilis & Natasa Grujic, 2020. "Distance as Determinant of FDI in Transition Countries. The Case of Serbia," Springer Proceedings in Business and Economics, in: Marietta Janowicz-Lomott & Krzysztof Łyskawa & Persefoni Polychronidou & Anastasios Karasavvoglou (ed.), Economic and Financial Challenges for Balkan and Eastern European Countries, pages 47-71, Springer.
    • Handle: RePEc:spr:prbchp:978-3-030-39927-6_4
    DOI: 10.1007/978-3-030-39927-6_4
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