Skip to main content
SpringerLink
Log in

Why Enterprises Do Not Invest in Europe? Management Claims and Countries Conditions in Developed and Emerging Markets

  • Published:
Journal of the Knowledge Economy Aims and scope Submit manuscript

Abstract

The choice of location of foreign direct investments is still one of the most explored topics in the economic and managerial literature. However, these studies focus on the variables that positively influence the choice of investing in a foreign country but rarely analyze factors that lead to the decision to not invest. While the economic literature considers the decision to invest as a linear process, the organizational approach recognizes complex factors in the decision-making processes. The present study is positioned within this debate. More specifically, the aim is to understand if the variables claimed as threats by managers are really barriers to investments and then if they negatively influence the level of inward FDI in the European countries, with a specific focus on differences between developed and emerging countries.

The context analyzed is represented by the 28 countries of the European Union, including a set of 12 variables that were collected and tested through a stepwise regression model. Subsequently, the differences between emerging and developed countries are analyzed by means of cluster analysis.

The findings highlight the existence of a mismatching between management claims on FDI barriers and the actual institutional and economic situations in European countries, due to informational and cognitive shortages or the opportunity to provide socially desirable answers. The cluster analysis underlines how managers claim on barriers to FDI seem to have a greater matching with conditions of emerging countries, showing a possible deepened knowledge of these contexts, compared to developed countries.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Fig. 1
Fig. 2

Similar content being viewed by others

Notes

  1. Due the nature of the indicator used to express the bureaucracy level, the sign of the regressor should be positive to confirm the hypothesis.

  2. See for example, the debate and the first effects of the Brexit choice in the United Kingdom in 2016 or the widespread emergence of nationalist movements, mostly in countries such as France, Italy, Austria or Poland.

  3. In the present work, central and eastern European countries, Baltic countries, and Balkan countries are considered emerging countries.

  4. Cluster 5 also includes some developed countries, such as Greece and Italy, which have been most affected by the international economic crisis and which have difficult economic and social conditions.

References

  • Adamoglou, X., & Kyrkilis, D. (2016). FDI entry strategies as a function of distance—the case of an emerging market: Turkey. Journal of the Knowledge Economy, 9(4), 1348–1373.

  • Aharoni, Y. (1966). The foreign investment decision process. Boston: Harvard University.

    Google Scholar 

  • Aharoni, Y., Tihanyi, L., & Connelly, B. L. (2011). Managerial decision-making in international business: a forty-five-year retrospective. Journal of World Business, 46(2), 135–142.

    Google Scholar 

  • Altomonte, C., & Guagliano, C. (2003). Comparative study of FDI in central and eastern Europe and the Mediterranean. Economic Systems, 27(2), 223–246.

    Google Scholar 

  • Andersen, P. H., & Strandskov, J. (1998). International market selection: a cognitive mapping perspective. Journal of Global Marketing, 11(3), 65–84.

    Google Scholar 

  • Arndt, C., Buch, C. M., & Mattes, A. (2012). Disentangling barriers to internationalization. Canadian Journal of Economics/Revue canadienne d'économique, 45(1), 41–63.

    Google Scholar 

  • Asiedu, E., & Lien, D. (2011). Democracy, foreign direct investment and natural resources. Journal of International Economics, 84(1), 99–111.

    Google Scholar 

  • Ayadi-Frikha, M. (2014). Cognitive map for identifying the determinants of the early and rapidly internationalizing firms. Journal of the Knowledge Economy, 5(3), 633–645.

    Google Scholar 

  • Basile, R., Castellani, D., & Zanfei, A. (2009). National boundaries and the location of multinational firms in Europe. Papers in Regional Science, 88(4), 733–748.

    Google Scholar 

  • Belussi, F., & Sammarra, A. (Eds.). (2009). Business networks in clusters and industrial districts: the governance of the global value chain. London: Routledge.

  • Bevan, A. A., & Estrin, S. (2004). The determinants of foreign direct investment into European transition economies. Journal of Comparative Economics, 32(4), 775–787.

    Google Scholar 

  • Bingham, C. B., & Eisenhardt, K. M. (2011). Rational heuristics: the ‘simple rules’ that strategists learn from experience. Strategic Management Journal, 32(13), 1437–1464.

    Google Scholar 

  • Bouchoucha, N., & Benammou, S. (2018). Does institutional quality matter foreign direct investment? Evidence from African countries. Journal of the Knowledge Economy, 1–15.

  • Boudier-Bensebaa, F. (2005). Agglomeration economies and location choice: foreign direct investment in Hungary. The Economics of Transition, 13(4), 605–628.

    Google Scholar 

  • Bruton, G. D., Ahlstrom, D., & Obloj, K. (2008). Entrepreneurship in emerging economies: where are we today and where should the research go in the future. Entrepreneurship Theory and Practice, 32(1), 1–14.

    Google Scholar 

  • Busse, M., & Hefeker, C. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23(2), 397–415.

    Google Scholar 

  • Cahen, F. R., Lahiri, S., & Borini, F. M. (2016). Managerial perceptions of barriers to internationalization: an examination of Brazil's new technology-based firms. Journal of Business Research, 69(6), 1973–1979.

    Google Scholar 

  • Camuffo, A., & Grandinetti, R. (2011). Italian industrial districts as cognitive systems: are they still reproducible? Entrepreneurship and Regional Development, 23(9–10), 815–852.

    Google Scholar 

  • Cantwell, J., & Piscitello, L. (2002). The location of technological activities of MNCs in European regions: the role of spillovers and local competencies. Journal of International Management, 8(1), 69–96.

    Google Scholar 

  • Casi, L., & Resmini, L. (2014). Spatial complexity and interactions in the FDI attractiveness of regions. Papers in Regional Science, 93(S1), S51–S78.

    Google Scholar 

  • Chidlow, A., Salciuviene, L., & Young, S. (2009). Regional determinants of inward FDI distribution in Poland. International Business Review, 18(2), 119–133.

    Google Scholar 

  • Clarke, I., & Mackaness, W. (2001). Management ‘intuition’: an interpretative account of structure and content of decision schemas using cognitive maps. Journal of Management Studies, 38(2), 147–172.

    Google Scholar 

  • Cyert, R. M., & March, J. G. (1963). A behavioral theory of the firm. Englewood Cliffs, NJ: Prentice Hall.

  • Defever, F. (2006). Functional fragmentation and the location of multinational firms in the enlarged Europe. Regional Science and Urban Economics, 36(5), 658–677.

    Google Scholar 

  • Del Giudice, M., & Maggioni, V. (2014). Managerial practices and operative directions of knowledge management within inter-firm networks: a global view. Journal of Knowledge Management, 18(5), 841–846.

    Google Scholar 

  • Del Giudice, M., Arslan, A., Scuotto, V., & Caputo, F. (2017). Influences of cognitive dimensions on the collaborative entry mode choice of small-and medium-sized enterprises. International Marketing Review, 34(5), 652–673.

    Google Scholar 

  • Disdier, A. C., & Mayer, T. (2004). How different is Eastern Europe? Structure and determinants of location choices by French firms in eastern and western Europe. Journal of Comparative Economics, 32(2), 280–296.

    Google Scholar 

  • Djarova, J. G. (1999). Foreign investment strategies and the attractiveness of central and eastern Europe. International Studies of Management and Organization, 29(1), 14–33.

    Google Scholar 

  • Dunning, J. H. (1988). The eclectic paradigm of international production: A restatement and some possible extensions. Journal of international business studies, 19(1), 1–31.

  • Ernst & Young. (2015) European Attractiveness Survey 2015: Comeback time. Available at: http://www.ey.com/Publication/vwLUAssets/EY-european-attractiveness-survey-2015/$FILE/EY-european-attractiveness-survey-2015.pdf

  • Fallon, G., & Cook, M. (2010). Exploring the regional distribution of inbound foreign direct investment in the UK in theory and practice: evidence from a five-region study. Regional Studies, 44(3), 337–353.

    Google Scholar 

  • Finkelstein, S., & Hambrick, D. C. (1996). Strategic leadership: top executives and their effects on organizations. St Paul: West Publishing Company.

    Google Scholar 

  • Grosse, R., & Trevino, L. J. (2005). New institutional economics and FDI location in central and eastern Europe. MIR: Management International Review, 45(2) 123–145.

  • Guercini, S., La Rocca, A., Runfola, A., & Snehota, I. (2014). Interaction behaviors in business relationships and heuristics: issues for management and research agenda. Industrial Marketing Management, 43(6), 929–937.

    Google Scholar 

  • Habib, M., & Zurawicki, L. (2002). Corruption and foreign direct investment. Journal of International Business Studies, 33(2), 291–307.

    Google Scholar 

  • Håkansson, H., & Snehota, I. (1995). Developing business relationships. London: Routledge.

    Google Scholar 

  • Hambrick, D. C., & Mason, P. A. (1984). Upper echelons: the organization as a reflection of its top managers. Academy of Management Review, 9(2), 193–206.

    Google Scholar 

  • Han, D., & Ojah, K. (1995). Evidence on managers’ perceptions of effects of government control of the business environment: a study of the republic of Korea. Thunderbird International Business Review, 37(1), 61–79.

    Google Scholar 

  • Hilber, C. A., & Voicu, I. (2010). Agglomeration economies and the location of foreign direct investment: Empirical evidence from Romania. Regional Studies, 44(3), 355–371.

    Google Scholar 

  • Johanson, J., & Vahlne, J. E. (1977). The internationalization process of the firm-a model of knowledge development and increasing foreign market commitments. Journal of International Business Studies, 8, 23–32.

    Google Scholar 

  • Johanson, J., & Vahlne, J. E. (2009). The Uppsala internationalization process model revisited: from liability of foreignness to liability of outsidership. Journal of International Business Studies, 40(9), 1411–1431.

    Google Scholar 

  • Kahiya, E. T. (2013). Export barriers and path to internationalization: a comparison of conventional enterprises and international new ventures. Journal of International Entrepreneurship, 11(1), 3–29.

    Google Scholar 

  • Leonidou, L. C. (2000). Barriers to export management: an organizational and internationalization analysis. Journal of International Management, 6(2), 121–148.

    Google Scholar 

  • Liang, F. H. (2017). Does foreign direct investment improve the productivity of domestic firms? Technology spillovers, industry linkages, and firm capabilities. Research Policy, 46(1), 138–159.

    Google Scholar 

  • Liu, H., Jiang, X., Zhang, J., & Zhao, X. (2013). Strategic flexibility and international venturing by emerging market firms: the moderating effects of institutional and relational factors. Journal of International Marketing, 21(2), 79–98.

    Google Scholar 

  • López-Duarte, C., & Vidal-Suárez, M. M. (2010). External uncertainty and entry mode choice: Cultural distance, political risk and language diversity. International Business Review, 19(6), 575–588.

    Google Scholar 

  • March, J. G., & Simon, H. A. (1958). Organizations. New York: John Wiley & Sons Inc.

  • Marcone, M. R. (2016). Multilocalisation and the growth of knowledge assets in medium-sized multinationals (MSMs). Journal of the Knowledge Economy, 7(3), 676–693.

    Google Scholar 

  • Medve-Bálint, G. (2014). The role of the EU in shaping FDI flows to east central Europe. JCMS: Journal of Common Market Studies, 52(1), 35–51.

    Google Scholar 

  • Mezias, J. M., & Starbuck, W. M. (2003). Studying the accuracy of managers’ perceptions: the odyssey continues. British Journal of Management, 14, 3–17.

    Google Scholar 

  • Omri, A., & Sassi-Tmar, A. (2015). Linking FDI inflows to economic growth in North African countries. Journal of the Knowledge Economy, 6(1), 90–104.

    Google Scholar 

  • Perri, A., & Peruffo, E. (2016). Knowledge spillovers from FDI: a critical review from the international business perspective. International Journal of Management Reviews, 18(1), 3–27.

    Google Scholar 

  • Pettigrew, A. M. (1990). Longitudinal field research on change: theory and practice. Organization Science, 1(3), 267–292.

    Google Scholar 

  • Powell, T. C., Lovallo, D., & Caringal, C. (2006). Causal ambiguity, management perception, and firm performance. Academy of Management Review, 31(1), 175–196.

    Google Scholar 

  • Resmini, L. (2000). The determinants of foreign direct investment in the CEECs: new evidence from sectoral patterns. The Economics of Transition, 8(3), 665–689.

    Google Scholar 

  • Sachwald, F. (2008). Location choices within global innovation networks: the case of Europe. The Journal of Technology Transfer, 33(4), 364–378.

    Google Scholar 

  • Salvatore, D. (2002). Relative taxation and competitiveness in the European Union: what the European Union can learn from the United States. Journal of Policy Modeling, 24(4), 401–410.

    Google Scholar 

  • Schwenk, C. R. (1988). The cognitive perspective on strategic decision making. Journal of Management Studies, 25(1), 41–55.

    Google Scholar 

  • Siedschlag, I., Smith, D., Turcu, C., & Zhang, X. (2013). What determines the location choice of R&D activities by multinational firms? Research Policy, 42(8), 1420–1430.

    Google Scholar 

  • Slangen, A. H., & Van Tulder, R. J. (2009). Cultural distance, political risk, or governance quality? Towards a more accurate conceptualization and measurement of external uncertainty in foreign entry mode research. International Business Review, 18(3), 276–291.

    Google Scholar 

  • Sousa, C. M., & Tan, Q. (2015). Exit from a foreign market: do poor performance, strategic fit, cultural distance, and international experience matter? Journal of International Marketing, 23(4), 84–104.

    Google Scholar 

  • Spies, J. (2010). Network and border effects: where do foreign multinationals locate in Germany? Regional Science and Urban Economics, 40(1), 20–32.

    Google Scholar 

  • Tarek, B. H., Zouhayer, M., & Adel, G. (2017). Entrepreneurial competitive intelligence between Uppsala model and born global theories in the case of north African SMEs. Journal of the Knowledge Economy, 1–22.

  • Unctad. (2017). Investment and the digital economy, World Investment Report 2017. Geneva: United Nation Publication.

    Google Scholar 

  • Uner, M. M., Kocak, A., Cavusgil, E., & Cavusgil, S. T. (2013). Do barriers to export vary for born globals and across stages of internationalization? An empirical inquiry in the emerging market of Turkey. International Business Review, 22(5), 800–813.

    Google Scholar 

  • Usherwood, S., & Startin, N. (2013). Euroscepticism as a persistent phenomenon. JCMS: Journal of Common Market Studies, 51(1), 1–16.

    Google Scholar 

  • Villaverde, J., & Maza, A. (2012). Foreign direct investment in Spain: Regional distribution and determinants. International Business Review, 21(4), 722–733.

  • Villaverde, J., & Maza, A. (2015). The determinants of inward foreign direct investment: evidence from the European regions. International Business Review, 24(2), 209–223.

    Google Scholar 

  • Volchek, D., Jantunen, A., & Saarenketo, S. (2013). The institutional environment for international entrepreneurship in Russia: reflections on growth decisions and performance in SMEs. Journal of International Entrepreneurship, 11(4), 320–350.

    Google Scholar 

  • Welch, D. E., & Welch, L. S. (1996). The internationalization process and networks: a strategic management perspective. Journal of International Marketing, 4, 11–28.

    Google Scholar 

  • Williams, C., & Martinez, C. A. (2012). Government effectiveness, the global financial crisis, and multinational enterprise internationalization. Journal of International Marketing, 20(3), 65–78.

    Google Scholar 

  • World Bank (2015), Doing business 2016 Measuring Regulatory Quality and Efficiency. Available at http://www.doingbusiness.org/~/media/WBG/DoingBusiness/Documents/Annual-Reports/English/DB16-Full-Report.pdf

  • Zhao, J. H., Kim, S. H., & Du, J. (2003). The impact of corruption and transparency on foreign direct investment: an empirical analysis. MIR: Management International Review, 41–62.

Download references

Author information

Authors and Affiliations

  1. Department of Economics, University of Perugia, Via Pascoli 20, 06123, Perugia, Italy

    Marina Gigliotti, Massimo Cossignani & Antonio Picciotti

Authors
  1. Marina Gigliotti
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Massimo Cossignani
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Antonio Picciotti
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Marina Gigliotti.

Additional information

Publisher’s Note

Springer Nature remains neutral with regard to jurisdictional claims in published maps and institutional affiliations.

Rights and permissions

Reprints and permissions

About this article

Check for updates. Verify currency and authenticity via CrossMark

Cite this article

Gigliotti, M., Cossignani, M. & Picciotti, A. Why Enterprises Do Not Invest in Europe? Management Claims and Countries Conditions in Developed and Emerging Markets. J Knowl Econ 10, 1738–1764 (2019). https://doi.org/10.1007/s13132-019-00591-7

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s13132-019-00591-7

Keywords

Search

Navigation