FDI in the CEEC's and the Theory of Real Options: An Empirical Assessment

Carlo Altomonte ()

LICOS Discussion Papers from LICOS - Centre for Institutions and Economic Performance, KU Leuven

Abstract: Building on the empirical evidence resulting from a newly developed database of foreign direct investment (FDI) operations in the countries of Central and Eastern Europe (CEECs), panel data techniques are used to show that, at the sector level, a consistent modelling of FDI flows needs to take into account not only the determinants traditionally considered by the literature, including the recent developments on gravity models, but also variables linked to the institutional environment in which the FDI is undertaken. The inclusion of these variables, affecting the risk and the uncertainty of the FDI operation, is in line with the main findings of the real option theory of investments, whose implications are here empirically tested with success.

Keywords: panel data; real option theory; gravity models; FDI; transition economies (search for similar items in EconPapers)
JEL-codes: C23 D81 F15 F21 P20 (search for similar items in EconPapers)
Pages: 34 pages
Date: 1998-09-01
New Economics Papers: this item is included in nep-eec and nep-ifn
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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Persistent link: https://EconPapers.repec.org/RePEc:lic:licosd:7698

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