‘Blind Bargaining’ and the Effects of Foreign Direct Investment on Recipient States: The Case of Post-Soviet and Eastern European Countries

Abstract

In recent years foreign direct investment (FDI) has become increasingly important for transition and developing economies. This emphasis on FDI is closely related to the ongoing globalization of world economic processes and the concomitant increase in international capital flows. Among transition economies, in particular, there is belief that the process of building a compatible economic infrastructure requires mobilization not only of national resources but also of the involvement of investment sources which are situated beyond the borders of the domestic economy (Lazebnyk 1997:84). In this context, large-scale diversified international investment activity has often been considered as one of the main leverages for the long-term development of a highly integrated economy (Zaxarin 2000:88–89). Recipient states with positive attitudes towards FDI typically expect that the utilization of foreign investment will provide them with access to contemporary technologies and management, contribute to the creation of national investment markets, increase the efficiency of both production factors and goods markets, maintain macroeconomic stabilization and facilitate the solution of social problems which might have arisen during the transitional period (Maxmudov 1998:39–40).