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The determinants of foreign direct investment during transition from a centrally-planned to a market economy: the cases of Bulgaria and Hungary

This thesis examines the factors which have influenced the inflow of foreign direct investment (FDI) to Bulgaria and Hungary since 1989, in the course of their transitions from centrallyplanned to market economies. It compares two countries that are similar in terms of their market size, industrial structure and openness of the economy (although different in other aspects). In so doing, the thesis seeks explanations of the marked divergence in their FDI patterns. It argues that the timing and scope of inward FDI in Bulgaria and Hungary, and central and eastern Europe more generally, depend upon the progress of transition. More specifically, the pattern of FDI depends upon the changes that transition introduces in the recipient countries' locational advantages. Moreover, the path and pace of transition are also influenced by the scale and characteristics ofFDI inflows. Dunning's eclectic paradigm of international production is used as the conceptual framework underlying the work. The comparison between Bulgaria and Hungary is done both through analysing macro statistical data on their actual FDI patterns, and by means of a survey and interviews with companies which have invested in the two countries. The survey researches a set of location-specific advantages, investors' strategic motivations, the investment process and the impact of the investment on the host economy. The results of the survey and the interviews highlight the importance of location-specific advantages moulded in the process of transition, in relation to the long-term strategies of foreign investors. The thesis argues that Hungary has attracted a much higher level ofFDI than Bulgaria because it has moved faster, and more effectively, towards an economic system based on a market economy. This argument is supported through an analysis of the two countries' legislative frameworks for FDI, their privatisation programmes and competition policies. The thesis also draws contrasts between their macro-economic and business environments, their political climates, and the conditions influencing the formation of investors' perceptions. These comparisons highlight shortcomings in the Bulgarian FDI environment relative to that of Hungary, in particular in the areas of privatisation, competition and general business conditions.

Identiferoai:union.ndltd.org:bl.uk/oai:ethos.bl.uk:285760
Date January 1999
CreatorsNestorova, Petya
PublisherUniversity of Sussex
Source SetsEthos UK
Detected LanguageEnglish
TypeElectronic Thesis or Dissertation

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