Home | Databases | WorldLII | Search | Feedback Edited Legal Collections Data

Demekas, Dimitri G.; Horváth, Balázs; Ribakova, Elina; Wu, Yi --- "Foreign direct investment in South-East Europe: what do the data tell us?" [2005] ELECD 389; in Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris (eds), "European Economic Integration and South-East Europe" (Edward Elgar Publishing, 2005)

Book Title: European Economic Integration and South-East Europe

Editor(s): Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781845425173

Section: Chapter 14

Section Title: Foreign direct investment in South-East Europe: what do the data tell us?

Author(s): Demekas, Dimitri G.; Horváth, Balázs; Ribakova, Elina; Wu, Yi

Number of pages: 33

Extract:

14. Foreign direct investment in
South-East Europe: what do
the data tell us?
Dimitri G. Demekas, Balázs Horváth,
Elina Ribakova and Yi Wu1

INTRODUCTION: WHY ANOTHER PIECE
ON FOREIGN DIRECT INVESTMENT?

Foreign direct investment (FDI), its determinants and its effects, has been
extensively studied. It has long been recognized that the benefits for the
host country can be significant, including knowledge and technology trans-
fer to domestic firms and the labour force, productivity spillovers, enhanced
competition, and improved access for exports abroad, notably to the source
country. Moreover, since FDI flows are non-debt creating, they are a pre-
ferred method of financing external current account deficits, especially in
developing countries, where these deficits can be large and sustained. At the
same time, FDI can be a mixed blessing. In small economies, large foreign
companies can ­ and often do ­ abuse their dominant market position.
Large investors are sometimes able to coax concessions in return for locat-
ing investment there, and aggressively use transfer pricing to minimize their
tax obligations. Multinational corporations attempt to influence the
domestic political process, especially in developing countries. And FDI can
give rise to potentially volatile balance of payment flows.2 Graham (1995),
Borensztein et al. (1995) and Lim (2001), to name but a few, provide useful
overall surveys of the literature on the impact of FDI on the host country.
Holland and Pain (1998) present the evidence on diffusion of innovation,
and Javorcik (2004), Javorcik et al. (2004) and Alfaro et al. ( ...