Tatjana Stevanović, Ivan Marković, Vinko Lepojević

DOI Number
First page
Last page


Foreign direct investments are an integral part of open and effective international economic system, and they are the main catalyst for development. However, the benefits of a foreign direct investment are not the same in all local communities, sectors and countries. International investments and national policy are aimed at foreign direct investment and reap benefits of investment development. The challenges are primarily related to the host countries, and the establishment of an efficient and transparent policy to attract investment, and that must be paid to building human and institutional capacity for their implementation. Compared to the existing literature, which focuses mainly on the effects of political risk or corruption on FDI, our contribution is reflected in testing a wider range of institutional variables and their impact on undertaking investment projects by foreign investors. The analysis included 5 countries of the Western Balkans in the period of 22 years starting from 1998 until 2019. In the analysis of empirical data, we used the fixed effect model (FEM) for evaluating FDI. Also, the quality of the research is promoted using balanced panel data.


FDI, Western Balkan Countries, Institutional Capacity, Corruption, Panel Data

Full Text:



Abed, G. & Davoodi, H. (2000). Corruption, Structural Reforms and Economic Performance in the Transition Economies. IMF Working Paper No. 132. Washington: International Monetary Fund.

Adams, S. & Opoku, E. (2015). Foreign direct investment, regulations and growth in sub-Saharan Africa. Economic Analysis and Policy, 47, 48–56.

Afonso, A., Schuknecht, L. & Tanzi, V. (2006), Public sector efficiency, Evidence for new EU member states and emerging markets, European Central Bank working paper series no 581.

Alonso, J. A. & Garcimartín, C. (2013). The Determinants of Institutional Quality. More on the Debate. Journal of International Development. Volume25, Issue2 March 2013, Pages 206-226.

Al-Sadig, A. (2009). The Effects of Corruption on FDI Inflows. Cato Journal, 29(2), 267-295.

Antonescu, D. (2014). Empirical analysis of foreign direct investments at NUTS 2 region, in European Union and Romania. Procedia Economics and Finance, 22, 681 – 689.

Aziz, A. & Makkawi, B. (2012). Relationship between Foreign Direct Investment and Country Population. International Journal of Business and Management, 7(8).

Bahadur Singh, A. & Tandon, P. (2015). Causality Between FDI Inflows and Export with Reference to India: An Analysis. IUP Journal of Applied Economics, July, 59-70.

Bellak, C., Leibrecht, M. & Ried, A. (2008). Labour costs and FDI flows into Central and Eastern European Countries: A survey of the literature and empirical evidence. Structural Change and Economic Dynamics, 19, 17-37.

Bénassy-Queré, A., Coupet, M. & Mayer, T. (2005). Institutional determinants of foreign direct investment. Working Paper CEPII, 2005 – 05.

Blonigen, B. & Bruce, A. (2005). A Review of the Empirical Literature on FDI Determinants. National bureau of economic research 1050 Massachusetts Avenue Cambridge, MA 02138. Retrieved from

Botrić, V. & Škuflić, L. (2006). Main Determinants of Foreign Direct Investment in the Southeast European Countries. Transition Studies Review, 13 (2), 359-377.

Bounoua Chaib, Matallah Siham (2014), The Impact of Institutional Quality in Attracting Foreign Direct Investment in Algeria, Topics in Middle Eastern and African Economies Vol. 16, No. 2.

Brada, J., Kutan, A. &Yigit, T. (2006). The effects of transition and political instability on foreign direct investment inflows- Central Europe and the Balkans. Economics of Transition Volume, 14(4), 649–680.

Brusse, M. & Groizard, L. (2008). Foreign Direct Investment, Regulations and Growth. World Economy, doi: 10.1111/j.1467-9701.2008.01106.x: 861–886.

Busse, M. & Carsten, H. (2007). Political risk, institutions and foreign direct investment. European Journal of Political Economy, 23, 397-415.

Daude, & Stein (2007), THE QUALITY OF INSTITUTIONS AND FOREIGN DIRECT INVESTMENT, Economics and Politics, Volume19, Issue3, November 2007, Pages 317-344.

De Mello Jr, L. (1999). Foreign direct investment-led growth: evidence from time series and panel data. Oxford Economic Papers, 51, 133-151.

Desbordes, R. &Vicard, V. (2009). Foreign direct investment and bilateral investment treaties: An international political perspective. Journal of Comparative Economics, 37, 372–386.

Di Mauro, F. (2000). The impact of economic integration on FDI and exports: A gravity approach.Centre for European Policy Studies, Working Document, br. 156.

Fazio, G. & Talamo, G.M.C. (2008). How Attractive is Good Governance for FDI? In Jay Choi, J. & Dow, S. (2008), Institutional Approach to Global Corporate Governance: Business Systems and Beyond, Emerald Publishing Limited, pp. 33-54.

Grosse, R. & Trevino, L. J. (2005). New institutional economics and FDI location in Central and Eastern Europe. Management International Review, 45(2), 123-145.

Habib, M. & Zurawicki, L. (2002). Corruption and Foreign Direct Investment. Journal of International Business Studies 33 (2), 291–307.

Helpman, E. (1984). A simple theory of international trade with multinational corporations. Journal of Political Economy, 92(3), 451-471. doi:

Houston, D. (2007). Can Corruption ever Improve an Economy. Cato Journal, 27(3), 325-342.

Kaufmann D., Kraay A. & Zoido-Lobation P. (1999). Governance Metters, Policy Research Working Paper No. 2196, Washington D.C.: World Bank.

lass Amy J. & Kamal S. (2002). Intellectual Property Rights and Foreign Direct Investment. Journal of International Economics, 56(2), 387-410.

Liua, Z., Xub, Y., Wangc, P. & Akamavi, R. (2016). A pendulum gravity model of outward FDI and export. International Business Review, 25, 1356–1371.

Macrae, J. (1982). Underdevelopment and the Economics of Corruption: A Game Theory Approach. World Development 10 (8), 677–87.

Magnus Blomström, Ari Kokko (2003), The Economics of Foreign Direct Investment Incentives, NATIONAL BUREAU OF ECONOMIC RESEARCH, Cambridge, Working Paper 9489,

Martens, Pim, Marco Caselli, Philippe De Lombaerde, Lukas Figge, and Jan Aart Scholte. (2015), New Directions in Globalization Indices. Globalizations, 12 (2), 217–228. doi:10.1080/14747731.2014.944336.

Martínez-San Román, V., Bengoa, M. & Sánchez-Robles, B. (2016). Foreign direct investment, trade integration and the home bias: evidence from the European Union. Empirical Economics 50, 197–229.

Noorbakhsh, F. & Paloni, A. (2001). Human Capital and FDI Inflows to Developing Countries: New Empirical Evidence. World Development, 26 (7), 1593-1610.

Panagiotis G. Liargovas, Konstantinos S. Skandalis (2012), Foreign Direct Investment and Trade Openness: The Case of Developing Economies, Social Indicators Research, April 2012., DOI: 10.1007/s11205-011-9806-9, Source: RePEc.

Qian, X. & Sandoval-Hernandez, J. (2016). Corruption Distance and Foreign Direct Investment. Emerging Markets Finance & Trade, 52, 400–419.

Quazi, R. (2007). Economic Freedom and Foreign Direct Investment in East-Asia. Journal of the Asia Pacific Economy, 12(3), 329-344.

Ramirez, M. (2006). Economic and Institutional Determinants of Foreign Direct Investment in Chile: A Time Series Analysis 1960-2001. Contemporary Economic Policy, 24(3), 459-471.

Shang-Jin Wei (2000), How Taxing is Corruption on International Investors?, The Review of Economics and Statistics, 2000, vol. 82, issue 1, 1-11.

Tintin, C. (2013). The determinants of foreign direct investment inflows in the Central and Eastern European Countries: The importance of institutions. Communist and Post-Communist Studies, 46, 287–298.

Wisniewski, T. & Pathan, S. (2014). Political environment and foreign direct investment: Evidence from OECD countries. European Journal of Political Economy, 36, 13–23.

Yin-Li, T., Azman-Saini, W. & Siong-Hook, L. (2012). International Evidence on the link between Foreign Direct Investment andInstitutional Quality. Inzinerine Ekonomika-Engineering Economics, 23(4), 379-386.



  • There are currently no refbacks.

© University of Niš, Serbia
Creative Commons licence CC BY-NC-ND
Print ISSN: 0353-7919
Online ISSN: 1820-7804