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Determinants of foreign direct investment: empirical evidence from EU accession candidates

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  • Hubert Janicki
  • Phanindra Wunnava

Abstract

This study examines bilateral foreign direct investments (FDI) between the members of the European Union and eight central and east European candidate (CEEC) economies in transition, awaiting accession into the European Union (EU). Cross-section data were obtained for Bulgaria, Czech Republic, Estonia, Hungary, Poland, Romania, Slovak Republic, and Slovenia for 1997. Once the main characteristics of FDI recipient and donor nations are identified in a bilateral framework, it will be feasible to predict future FDI inflows. This study reveals that the key determinants of FDI inflows in CEECs are size of the host economy, host country risk, labour costs in host country, and openness to trade. Countries that are receiving fewer foreign investments could make themselves more attractive to potential donor nations by focusing on some of the key determinants identified by this study.

Suggested Citation

  • Hubert Janicki & Phanindra Wunnava, 2004. "Determinants of foreign direct investment: empirical evidence from EU accession candidates," Applied Economics, Taylor & Francis Journals, vol. 36(5), pages 505-509.
    • Handle: RePEc:taf:applec:v:36:y:2004:i:5:p:505-509
    DOI: 10.1080/00036840410001682214
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    References listed on IDEAS

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    1. Ray Barrell & Dawn Holland, 2000. "Foreign Direct Investment and Enterprise Restructuring in Central Europe," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(2), pages 477-504, July.
    2. Laura Resmini, 2000. "The Determinants of Foreign Direct Investment in the CEECs: New evidence from sectoral patterns," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 8(3), pages 665-689, November.
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