The Locational Determinants of Foreign Direct Investment in Central Europe

Posted: 10 Jul 1997

See all articles by Paulo Guimarães

Paulo Guimarães

University of Minho - Department of Economics

Robert J. Rolfe

University of South Carolina - Department of Accounting

Timothy Doupnik

University of South Carolina - Darla Moore School of Business

Douglas P. Woodward

University of South Carolina

Date Written: Undated

Abstract

This paper analyzes the locational probability of manufacturing investment by foreign-based multinational companies (MNCs) in Central Europe. The analysis focuses on direct investment during the early years of the economic transition to capitalism, using 1990-93 individual plant data reported for new operations. The probability of country selection was estimated with a conditional logit model. Based on a review of the location literature concerning MNCs, seven independent variables are tested: per capita GDP, population, wage costs, political stability, tax holidays, the depreciation rate for equipment, and loss carryforward (the number of years a tax loss can be carried forward to offset taxable income). The model performed well. All the estimates had the expected sign. Six variables--per capita GDP, population, political stability, the depreciation rate for equipment, the length of the tax holiday, and loss carryforward--were statistically significant. Interestingly, all the policy variables tested appeared to influence the probability of location in Central Europe.

JEL Classification: F0

Suggested Citation

de Freitas Guimarães, Paulo and Rolfe, Robert J. and Doupnik, Timothy S. and Woodward, Douglas P., The Locational Determinants of Foreign Direct Investment in Central Europe (Undated). Available at SSRN: https://ssrn.com/abstract=8729

Paulo De Freitas Guimarães

University of Minho - Department of Economics

Braga 4710-057
Portugal
+351 53 604215 (Phone)

Robert J. Rolfe

University of South Carolina - Department of Accounting ( email )

The Francis M. Hipp Building
1705 College Street
Columbia, SC 29208
United States
803-777-2641 (Phone)

Timothy S. Doupnik

University of South Carolina - Darla Moore School of Business ( email )

1705 College St
Francis M. Hipp Building
Columbia, SC 29208
United States

Douglas P. Woodward (Contact Author)

University of South Carolina ( email )

The Francis M. Hipp Building
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Columbia, SC 29208
United States
803-777-2510 (Phone)
803-777-9344 (Fax)

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