Foreign Direct Investment Attractiveness of Central, Eastern, and Southeastern European Countries: The Importance of Policy-Related Location Advantages

The paper aims to enhance the discussion about foreign direct investment (FDI) attractiveness of Central, Eastern, and Southeastern European (CESEE) countries, by focusing on those location determinants of FDI which fall within the scope of public policy. First, we summarize the literature on location advantages. Second, some general trends in FDI inflows to the CESEE region are outlined. Third, based on data for 15 CESEE countries in 2013 and 2017, we build a composite index, which allows us to rank countries in terms of their FDI attractiveness, as well as its most important policy-related dimensions, such as institutional framework, infrastructure endowment, labor force quality, and cost competitiveness. In addition to allowing comparison between economies across these dimensions, the results reveal areas in which some countries need improvement so that they can attract more FDI.