Paper proposal for the 10th bi-annual EACES conference

PATTERNS OF TRANSITION AND NEW APPROACHES TO COMPARATIVE ECONOMICS

Moscow, August 28-30, 2008

Inter-temporal Comparative View of the Estonian Inward-Outward FDI Pattern

Urmas Varblane, Tõnu Roolaht

Theme: Patterns of Transition

PhD Urmas Varblane
Professor of International Business, Vice Dean
University of Tartu,
Faculty of Economics and Business Administration
Narva Rd. 4-A226,
51009 Tartu, Estonia
Phone: +372 7376 361
Fax: +372 7 376 327
E-mail: / PhD Tõnu Roolaht
Senior Researcher of International Business
University of Tartu,
Faculty of Economics and Business Administration
Narva Rd. 4-A219,
51009 Tartu, Estonia
Phone: +372 7 344950
Fax: +372 7 376 327
E-mail:

Abstract

Proposed paper discusses the foreign direct investments in the transition economy from the inward-outward perspective. Authors investigate Estonian companies who have received as well as made foreign direct investments. The paper outlines inter-temporal changes in the motives, problems, and determinants considered to be most important by these investors. The aim of the paper is to determine the changes in the Estonian inward-outward FDI pattern over almost a decade. First survey of Estonian inward-outward FDI was conducted by authors and their colleagues in 2001. These responses included retrospective data concerning 1997. Follow-up survey took place in 2006. By comparing the results of these to surveys, we are able to draw important conclusions concerning the changes in the transition of Estonia as well as generalise these results at least to all three Baltic countries, which are to the great extent similar. The paper starts with an introduction of theoretical approaches connecting inward FDI and outward FDI. FDI recipients tend to have better financial and knowledge basis for the expansion abroad than solely domestic companies. However, the foreign owners are not always supportive to these indirect FDI (FDI intermediated via subsidiary) initiatives. In some occasions corporate policies favour strict role distributions, which foresee only limited regional authority for FDI recipient subsidiaries. It can even lead to outward disinvestment from some target markets. These strategic considerations are likely to emerge or disappear in time according to the changes in the competence levels of the foreign owner company and its subsidiary in a transition country. The proposed inter-temporal comparison sheds light on the transforming nature of indirect FDI in Estonia. Authors offer a versatile comparative static view of inward-outward FDI determinants along with the background information about FDI flow dynamics during the observation period. This enables us to provide several theoretical, managerial and policy implications.

Keywords: inward-outward FDI, transition economy, inter-temporal comparative analysis