Taking into consideration the theories of Foreign Direct Investment (FDI),the Diamond Model and the PEST framework, assess comparatively thesuccess of Poland, Ukraine, Russia, Hungary and the Czech Republic inattracting FDI during the period 1990-2002. Which is more successful andwhy?
Since restructuring towards a market economy began the growth of Foreign DirectInvestment (FDI) in some Central and Eastern European countries has been impressive.FDI has played an important role in the transformation of these countries, since it bringsadvanced technology, management skills and access to exports markets (Moosa, 2002)
. Nevertheless, these economies are not homogeneous and both the level and growth of FDI differ across countries. Considering Poland, Czech Republic, Hungary, RussianFederation and Ukraine, while some them have attracted a good amount of foreigncapital others were not so successful.The importance of FDI has lead to the development of theories that try to explain whyMNCs decide invest through FDI and they choose one country in preference to another to locate their foreign business activity (outward FDI), or in other way, why somecountries are more successful than others in attracting FDI (inward FDI) (Moosa, 2002).Accordingly, taking in consideration theories of FDI, the Diamond model and the PESTframework, this essay will examine the determinants of FDI into the above countriesduring their transition towards a market economy, in order assess comparatively thesuccess of them in attracting FDI. Some quantitative and qualitative measures will beused in order to define ranks.Considering that usually there is not a singly factor that influences FDI, relative recenttheories such as the eclectic theory (Dunning, 1977, 1979, 1988)
are more effective inexplaining the determinants of FDI. Nevertheless, single hypothesis will be consideredfor expository purposes.
Moosa, I. A. (2002)
Foreign Direct Investment: Theory, Evidence and Practice
, Publisher (n. d.).
Source: Moosa, I. A. (2002), p. 36.