ECONOMIC AND CULTURAL DETERMINANTS OF FOREIGN DIRECT INVESTMENT IN EU COUNTRIES. EVIDENCE FROM 2019 AND 2023

Codina Dorel - Marian
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Codina Dorel - Marian: DOCTORAL SCHOOL OF ECONOMICS AND BUSINESS ADMINISTRATION, ALEXANDRU IOAN CUZA UNIVERSITY OF IASI, IASI, ROMANIA

Annals - Economy Series, 2026, vol. 2, 360-383

Abstract: This study examines the economic and cultural determinants of foreign direct investment (FDI) inflows across European Union countries, with a comparative focus on 2019 and 2023. The analysis is based on a cross-sectional dataset covering the 27 EU member states and combines economic indicators with a cultural variable derived from Hofstede’s framework, namely the Uncertainty Avoidance Index (UAI). The research aims to identify whether structural country characteristics help explain the distribution of FDI inflows and whether their explanatory power changes between a relatively stable period and a more uncertain economic context. The empirical approach includes descriptive analysis, thematic mapping, Pearson and partial correlation analysis, and Ordinary Least Squares (OLS) regression models estimated separately for each year. The results show that in 2019, economic development and cultural attitudes toward uncertainty were significantly associated with FDI inflows, suggesting that more developed and institutionally predictable environments were more attractive to foreign investors. In contrast, for 2023, the estimated relationships are weaker and statistically insignificant, while the overall explanatory power of the model declines. These findings suggest that traditional structural determinants of FDI may become less informative during periods of increased global uncertainty, when investment decisions are more strongly influenced by volatility, corporate restructuring and broader geopolitical conditions. The study contributes to the literature by integrating economic and cultural variables within the same empirical framework and by highlighting the changing relevance of FDI determinants across different economic contexts.

Keywords: FDI; European Union; annual earnings; uncertainty avoidance; cultural determinants; OLS regression; cross-country analysis (search for similar items in EconPapers)
Date: 2026
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Persistent link: https://EconPapers.repec.org/RePEc:cbu:jrnlec:y:2026:v:2:p:360-383

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