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Foreign Direct Investment in Central and Eastern European Countries : The Role of Institutional Reforms

Author

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  • Vannini, Stefano

    (UNIVERSITE CATHOLIQUE DE LOUVAIN, Institut de Recherches Economiques et Sociales (IRES))

Abstract

Despite 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.

Suggested Citation

  • Vannini, Stefano, 1994. "Foreign Direct Investment in Central and Eastern European Countries : The Role of Institutional Reforms," Discussion Papers (IRES - Institut de Recherches Economiques et Sociales) 1995024, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES), revised 14 Jul 1995.
  • Handle: RePEc:ctl:louvir:1995024
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    Cited by:

    1. 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.

    More about this item

    Keywords

    multinational firm; mixed duopoly; build vs. buy; reforms; wage differential;

    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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