The geography of foreign investment in the EU neighbourhood

Abstract

This paper aims at investigating the drivers of Multinational Enterprise (MNE) investmen t incountries linked to the ‘core’ of the European Union (EU 15) by different degrees offunctional, economic and political integration: the EU ‘new’ Member States, accession andcandidate countries, European Neighbourhood Policy countries, as well as Russia.Understanding the drivers of foreign direct investment (FDI) in these countries is highlyrelevant in consideration of their increasing integration into the global market and the stronginfluence exerted by the EU on this process. By employing data on individual greenfieldinvestment projects for the period 2003 to 2008, this paper aims to disentangle the drivers ofFDI in these countries for different industrial sec tors, business functions and investmentorigins. The empirical results suggest that FDI in the area tends to follow market-seeking andefficiency-oriented strategies, and show path-dependency and concentration patterns that mayreinforce core-periphery development trajectories in the EU neighbourhood.