Foreign Direct Investment in Eastern Europe: Applying Traditional Models of FDI to the Transitional Countries of Eastern Europe

An empirical analysis is used to determine whether the factors that normally explain FDI flows to developing countries are also suitable to explain FDI flows to the developing countries of Eastern Europe for the years 1988-1992. It was found that a typical set of explanatory variables which explain FDI flows to non Eastern Europe developing countries very well, is not a useful set of determinants for FDI flows to Eastern Europe. Conclusions are drawn concerning the extent to which these results reflect the current state of political and economic transition taking place in Eastern Europe