Foreign Direct Investment in Eastern Europe: Harnessing FDI to the Transition from Plan to Market

Abstract

As the drama in the East continues to unfold, the situation calls for continuing assessment and reassessment. The dust has not settled from the major upheavals of the turn of the decade, but some of the contours of the new landscape are beginning to be discernible. In any appraisal of the still-emerging role of foreign direct investment (FDI) in the Eastern economies, it is important to distinguish the potential from the actual. This chapter will first set forth the rationale for FDI, as an important element in the transition from planned to market economy, that is specific to Eastern Europe in the 1990s. It will then use this as a framework for analyzing — in a necessarily preliminary way — the actual role of FDI in the first four years of the decade.

This chapter is based on research supported by a grant from the Ontario Council of International Business. The results were first presented at the Thirty-fourth Annual Convention of the International Studies Association, in Acapulco, Mexico, March 1993. An earlier version was published in the journal Transnational Corporations, Vol. 2, No. 3 (December 1993), pp. 97–120, under the title The Role of Foreign Direct Investment in the Transition from Planned to Market Economies’.