The role of foreign direct investments in southeastern Europe

Abstract

From the beginning of the transition process, foreign direct investments (FDI) have been an essential pillar in southeastern European economies, a priority for moving society toward a developed market economy. The World Bank has conducted Enterprise Surveys on many countries using data from a representative sample of private-sector firms. These data are used herein from an accounting approach to examine, via a set of variables, the impact of foreign ownership. The findings are that: (i) foreign ownership has helped restructure firms toward a viable market economy; (ii) FDI has a positive effect on employment and exports; and (iii) FDI, in line with the literature, is expected to influence future capital accumulation and output. Overall, FDI has a positive impact and tends to affect the restructuring of domestic firms.