FDI Determinants in the European Union: Empirical Application

Abstract

The purpose of this paper is to verify and estimate, besides gravity factors, the individual country specific determinants in influencing FDI inflows to the selected countries. More than standard factors, we revile additional factors, which could explain the investment in the EU. In this context, we take into account the neighboring effects as an important motive for FDI inflows last time. Our findings verify that efficiency-seeking and more complex form of the FDI determinants is more pronounced strategy now in the new EU member states than market-seeking FDI that is more relevant for the whole EU. Moreover, in addition to the existing literature, we argue that a variation in FDI determined by the EU-2004 enlargement started earlier than official date and remains its impact. Supposedly, a significant surrounding market potential could be for the new EU member states an evidence of the complex vertical FDI determinant today.

Keywords

• foreign direct investment, the new eu member states, country-specific determinants of fdi, panel data, fixed effects, neighboring effects.