Foreign Direct Investment in Central and Eastern Europe : the IDP trajectories of selected countries

Abstract

This study attempts to investigate the timing and factors involved in the development and internationalisation of six Central and East European (CEE) economies from the perspective of advancing along the investment development path (IDP) model/paradigm. It also strives to identify the differences and similarities between the individual countries' IDP trajectories and to arrive at conclusions and policy recommendations designed not only for the analysed countries but which might serve or be of interest to other European states as well. The dominating empirical part of this study is based on data derived from the UNCTAD World Investment Reports and Handbook of Statistics. The analysis covers the entire period of the six countries' transition process to the market led economic system (with the exception of the Czech Republic and Slovakia, for which data do not include the years 1990-1992 when both were functioning as Czechoslovakia) up to 2006, the last year for which the relevant data for all countries were available. The first part of the study outlines the principal components of the IDP model and presents a review of empirical studies applying and/or relating to, the IDP model in CEE. The following section compares IDP trajectories of the six selected CEE countries. The analysis is concentrated on three key issues: the timeframe and conditions of moving from IDP stage 1 to stage 2; the problems of determining the advance towards IDP stage 3 and the significance in this context of the outward foreign direct investment (FDI) performance index. The concluding section summarizes the main findings and policy implications, draws attention to their limitations and delineates future research options. (original abstract)