engleski

Foreign direct investment in southeast European countries - The role of the service sector

According to economic theory, FDI towards developing countries flows to labor-intensive and low technology production, while in the opposite direction mainly towards high-technology production. Identification of determining factors of FDI is a complex problem, which depends on several characteristics specific for each country, sectors and companies. All those factors could be grouped in three broad categories: economic policy of host country, economic performance and attractiveness of national economy. An important question is how South East European countries can attract more foreign investment. To find the answer, this paper uses FDI data for SEE countries and applies panel data estimation method, to determine the main host country determinants of FDI. For SEE countries FDI inflows are largely dependent on the completion of the privatization process. Since the privatization in those countries was connected with the service sector, and was less successful in manufacturing sector, our findings suggest that those factors are also relevant for FDI attraction in the analyzed 1996-2002 period.

FDI; determinants; SEE country

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