Abstract
The chapter examines whether there are specific features driving foreign direct investment (FDI) to the Western Balkan (WB) countries—Albania, Bosnia and Herzegovina, Croatia, Macedonia, Montenegro and Serbia—compared with other transition economies. Despite many positive developments during the 2000s, the Balkans may still face an image problem: for many potential foreign investors, the word Balkan ‘conjures up troubled images of war and conflict, rather than investment opportunities and economic potential’ (Cviic and Sanfey, 2010, p. 124). This chapter explores whether FDI into the Western Balkans has been lower than can be explained by the economic characteristics of the region, such as the smaller size of domestic markets and greater distance from the main investing economies. Our analysis confirms this view; FDI to the Western Balkans is driven by the same economic, geographical and institutional factors as other transition economies, but there is evidence of a significant negative regional effect.
A longer version of the paper was published in The Economics of Transition, Vol. 22 (2) 2014. We thank John Wiley and Sons for granting a licence to publish this shorter version of the paper. The authors would also like to thank Jan Svejnar, Laza Kekic, Will Bartlett and participants of various conferences for useful comments on earlier versions of the paper, and Adeline Pelletier for excellent research assistance. Any remaining errors are our own.
This is a preview of subscription content, log in via an institution to check access.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Anderson, J. E. and van Wincoop, E. (2003). ‘Gravity with Gravitas: A Solution to the Border Puzzle’, American Economic Review, 93 (1), pp. 170–192.
Bartlett, W. (2008). Europe’s Troubled Region. Economic Development, Institutional Reform and Social Welfare in the Western Balkans, London and New York: Routledge.
Bevan, A. and Estrin, S. (2004). ‘The determinants of foreign direct investment into European transition economies’, Journal of Comparative Economics, 32 (4), pp. 775–787.
Bevan, A., Estrin, S. and Meyer, K. (2004). ‘Foreign investment location and institutional development in transition economies’, International Business Review 13 (1), pp. 43–64.
Bloningen B. A. (2005). ‘A review of the empirical literature on FDI determinants’, Atlantic Economic Journal, 33, pp. 383–403.
Brada, J. C., Kutan, A. M. and Yigit, T. M. (2006). ‘The effects of transition and political instability on foreign direct investment inflows: Central Europe and the Balkans’, Economics of Transition, 14 (4), pp. 649–680.
Brainard, L. S. (1997). ‘An Empirical Assessment of the Proximity-Concentration Trade-off between Multi-National Sales and Trade’, American Economic Review, 87(4), pp. 520–44.
Carr, D. L., Markusen, J. R. and Maskus, K. E. (2001). ‘Estimating the knowledge-capital model of the multinational enterprise’, American Economic Review, 91(3), pp. 693–708.
Chakrabarti, A. (2001). ‘The determinants of foreign direct investment: Sensitivity analyses of cross country regressions’, Kyklos, 54, pp. 89–114.
Christie, E. (2003). ‘Foreign direct investment in Southeast Europe’, WIIW Working Paper No. 24, Vienna, The Vienna Institute for International Economic Studies (WIIW), March, http://wiiw.ac.at/foreign-direct-investment-in-southeast-europe-p-523.html
Cviic, C. and Sanfey, P. (2010). In Search of the Balkan Recovery. The Political and Economic Reemergence of South-Eastern Europe, New York: Columbia University Press.
Demekas, D. G., Horváth, B., Ribakova, E. and Wu, Y. (2005). ‘Foreign Direct Investment in Southeastern Europe: How (and how much) can policies help?’, IMF Working Paper 05/110, http://www.imf.org/external/pubs/ft/wp/2005/wp05110.pdf
Dikova D. and van Witteloostuijn, A. (2007). ‘Foreign direct investment mode choice: entry and establishment modes in transition economies’, Journal of International Business Studies, 38, pp. 1013–1033.
Dunning, J. H. (1993). Multinational Enterprises and the Global Economy, Wokingham: Addison-Wesley.
Dunning, J. H. and Lundan, S. (2009). Multinational Enterprises and the Global Economy, 2nd ed., Cheltenham: Edward Elgar.
Estrin, S., Hanousek, J., Kocenda, E. and Svejnar, J. (2009). ‘The effects of privatization and ownership in transition economies’, Journal of Economic Literature, 47 (3), pp. 699–728.
Estrin, S., Richet, X. and Brada, J. (eds) (2000). Foreign Direct Investment in Central Eastern Europe: Case Studies of Firms in Transition, Armonk and London: M. E. Sharpe.
Globerman, S. and Shapiro, D. (2003). ‘Governance infrastructure and US foreign direct investment’, Journal of International Business Studies, 34 (1), pp. 19–39.
Grosse, R. and Trevino, L. J. (2005). ‘New institutional economics and FDI location in Central and Eastern Europe’, Management International Review, 45, pp. 123–145.
Habib, M. and Zurawicki, L. (2002). ‘Corruption and Foreign Direct Investment’, Journal of International Business Studies, 33, pp. 291–307.
Hejazi, W. and Pauli, P. (2003). ‘Motivations for FDI and domestic capital formation’, Journal of International Business Studies, 34 (3), pp. 282–289.
Hunya, G. (2011). ‘Diverging patterns of FDI recovery’, in WIIW Database on 2011 Foreign Direct Investment in Central, East and Southeast Europe, Vienna: The Vienna Institute for International Economic Studies.
Hunya, G. (2012). ‘Short-lived recovery’, in WIIW Database on 2012 Foreign Direct Investment in Central, East and Southeast Europe, Vienna: The Vienna Institute for International Economic Studies.
Janicki, P. H. and Wunnava, P. H. (2004). ‘Determinants of foreign direct investment: empirical evidence from EU accession candidates’, Applied Economics, 36, pp. 505–509.
Kalotay, K. (2010). ‘Patterns of inward FDI in economies in transition’, Eastern Journal of European Studies, 1 (2), pp. 55–76.
Kekic, L. (2005). ‘Foreign direct investment in the Balkans: recent trends and prospects’, Journal of Southeast European and Black Sea Studies, 5.
Lankes, H. K. and Venables, A. J. (1996). ‘Foreign direct investment in economic transition: the changing pattern of investments’, Economics of Transition, 4 (2), pp. 331–347.
Meyer, K. (1998). Direct Investment In Economies In Transition, London: Edward Elgar.
Mundell, R. A. (1957). ‘International Trade and Factor Mobility’, The American Economic Review, 47 (3), pp. 321–335.
Rugman, A.M. (1982). New Theories of the Multinational Enterprise. New York: Taylor & Francis.
UNCTAD. World Investment Report 2011, available online.
Uvalic, M. (2010). Serbia’s Transition. Towards a Better Future, Basingstoke, Palgrave Macmillan; Serbian edition (2012), Tranzicija u Srbiji. Ka boljoj buducnosti, Beograd: Zavod za udzbenike.
Uvalic, M. (2012). ‘Transition in Southeast Europe: Understanding economic development and institutional change’, in Gérard Roland (ed) (2012). Economies in Transition. The Long Run View, Basingstoke: Palgrave Macmillan, pp. 364–399.
Editor information
Editors and Affiliations
Copyright information
© 2016 The Editor(s)
About this chapter
Cite this chapter
Estrin, S., Uvalic, M. (2016). Are Foreign Direct Investments in the Balkans Different?. In: Besley, T. (eds) Contemporary Issues in Development Economics. International Economic Association Series. Palgrave Macmillan, London. https://doi.org/10.1057/9781137529749_11
Download citation
DOI: https://doi.org/10.1057/9781137529749_11
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-137-57944-7
Online ISBN: 978-1-137-52974-9
eBook Packages: Economics and FinanceEconomics and Finance (R0)