DETERMINANTS OF ESTABLISHMENT MODE CHOICE IN CENTRAL EASTERN EUROPE

Abstract

The last two decades have seen a vigorous upturn in global Foreign Direct Investment flows. From the time of Second World War the majority of FDI flows have had urbanized economies as both their origin and destination. However, during recent years the distribution of the flows into emerging and transition economies in Eastern European has been greater than before. This investigation elaborates the factors, which have significant impact on FDI in Central and Eastern European countries.

In this study two streams of foreign direct investment literature, choice between greenfield vs. acquisition has been elaborated. This study addresses country (market potential, investment risk), firm (organization learning, technological intensity, international strategy) and industry level (industry growth, industry concentration) factors and determines establishment mode choice in CEE countries. The research was carried out using the case study method. Previous theories of the topic were used as a mirror to compare empirical results.

The qualitative research was carried out via themed interviews of the specialists who manage the case company’s establishment mode choice decision in CEE. The main findings of the studies emphasize that decision of establishment mode choice effect country, firm and industry level factors. The study suggests that organization learning, international strategy, technological intensity, market potential, investment risk, industry growth and industry concentration are significant factors to be considered by firms when they make decisions regarding foreign direct investment in CEE countries.