Foreign direct investment in transition economies: an institutional approach

Foreign direct investment (FDI1 thereafter) is very important for economic growth in transition economies. They have major impact in economic development as a source of physical capital, diffusion of technology, improvements in management and marketing techniques, and enhancing institutional setting of these economies toward market oriented. In this paper, an institutional approach to FDI inflow is investigated to identify relevant factors that have shaped and influenced transition economies. The role of institutions in the inflow of FDI in transition economies is estimated empirically by using Seemingly Unrelated Regression Estimation (SURE) technique.