Origins of Foreign Direct Investment in Croatia: Application of an Expanded Gravity Model

Joel I. Deichmann ()
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Joel I. Deichmann: Bentley University

A chapter in Balkan and Eastern European Countries in the Midst of the Global Economic Crisis, 2013, pp 3-21 from Springer

Abstract: Abstract This paper examines the origins of foreign direct investment (FDI) into the Republic of Croatia, paying special attention to gravity effects. The gravity model posits that interaction between two countries is positively associated with their mass and negatively associated with the distance between them. Six expanded gravity models are set forth to analyze FDI into Croatia, with dependent variables defined as cumulative FDI value from 2000 to 2009, FDI during the global recession (2008–2009), and FDI measured by the number of transactions. Results show that Croatia fits a distinctive transition economy scenario that favors follow-the-leader firms from nearby (especially EU) origins. Another key finding is the role of shared history, which favors firms from the successor states of the Austro-Hungarian Empire and Yugoslavia. Policy implications of the results include a call for government action to enhance FDI facilitation and overcome remaining barriers for foreign firms.

Keywords: Foreign Direct Investment; Gravity Model; Cultural Distance; Foreign Direct Investment Inflow; Origin Country (search for similar items in EconPapers)
Date: 2013
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Persistent link: https://EconPapers.repec.org/RePEc:spr:conchp:978-3-7908-2873-3_1

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DOI: 10.1007/978-3-7908-2873-3_1

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