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Italian FDI integration with Southeast Europe: country and firm-level evidence

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  • Eleonora Cutrini, Francesca Spigarelli

    (University of Macerata)

Abstract

Southeast European countries have experienced significant economic integration into the world economy since 2000, through international capital flows and especially foreign direct investment (FDI). The present work sheds light on recent trends in Italy-Western Balkans economic integration through FDI. The methodology is based on a country level analysis and on case studies, designed to ascertain Italian firms’ underlying motives for investment in the area. Evidence suggests that the phenomenon is broader than official statistics would indicate: Italian firms often set up subsidiaries without formal or direct capital control. As integration in the area is a recent phenomenon, it is not surprising that the main determinants of Italian investments are cost reductions and new market opportunities, typical of initial stages of penetration in a foreign country. What is interesting in this context is that local entrepreneurs regard efficiency-seeking investments as profitable only if they are connected to market-seeking goals. We find evidence also of localized industrial development stimulated by the entry of Italian firms which is activating subcontracting relationships with existing firms in the host region.

Suggested Citation

  • Eleonora Cutrini, Francesca Spigarelli, 2011. "Italian FDI integration with Southeast Europe: country and firm-level evidence," Working Papers 33-2011, Macerata University, Department of Studies on Economic Development (DiSSE), revised Mar 2011.
    • Handle: RePEc:mcr:wpaper:wpaper00033
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    References listed on IDEAS

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    1. Gene M. Grossman & Elhanan Helpman, 2003. "Outsourcing Versus FDI in Industry Equilibrium," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 317-327, 04/05.
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    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
    • P20 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies - - - General

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