Foreign Direct Investments and Home Country’s Institutions: The Case of CEE Countries

Dorota Ciesielska-Maciagowska, Marcin Koltuniak
European Research Studies Journal, Volume XXIV, Issue 1, 335-353, 2021
DOI: 10.35808/ersj/1965


Purpose: This paper's research objective was to determine if the scale of outward foreign direct investments (OFDI – outward FDI) from Central and Eastern Europe (CEE) countries is determined by the key home country's institutional factors. Design/Methodology/Approach: To achieve the assumed research aim, an econometric power panel model illustrating the interdependencies between the natural logarithms of the CEE countries' outward FDI per capita stocks values and the levels of natural logarithms of their explanatory variables, which were the key home country's institutional factors, during or at the end of the years 2004-2018, that constituted a balanced data panel, were used. The slope coefficients of the model indicated the percentage change the dependent variable (i.e., the value of the OFDI stocks of CEE countries growth pace) changes if a given exogenous institutional variable decreases or grows by 1.0%, which enables to determine if the scale of outward FDI from the CEE region was significantly determined in the examined period by the considered key home country's institutional factors. Findings: The empirical results show that the home country's institutional factors determine OFDI stocks' scale from the CEE countries. Practical Implications: Improving the quality of the institutional environment of the country of origin of FDI would contribute to increasing the scale of foreign capital expansion of enterprises from the CEE region. Originality/value: The conducted study enabled to indicate the key directions of possible future improvements in the institutional environment of CEE enterprises, which would enable to significantly increase the scale of their foreign capital expansion, which would result in the growth of their exports that in turn would result in their further economic development, which was the case of many other well developed, as well as emerging economies. Such a result would contribute to the significant improvement of the effectiveness of the region's countries' economic and institutional policies in terms of supporting international economic cooperation.

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