Copenhagen Business School1 International Business and Government Relations in the 21st Century

The transition period has been a period of extraordinary politics. This chapter discusses how institutional change has created bureaucratic barriers to entry, but also windows of opportunity for foreign direct investment (FDI). The high costs and high investment risks associated with FDI in Central and Eastern Europe (CEE) are a reflection of the institutional development. Thus, inflows of FDI have been largest in those countries that made most progress in establishing a market-oriented institutional framework. After outlining the macro-perspective, the chapter discusses how aspects of the institutional framework and FDI policy affect diverse types of investment projects. Acquisition and Greenfield investors are concerned about with different aspects of government policy: privatization and regulatory policies for acquirers and investment incentives, regional policy and special economic zones for Greenfield investors