The paper applies the recently developed approach of real option theory of investments, which explicitly models uncertainty, expectations and irreversibility, to the case of foreign direct investment (FDI), integrating the traditional theories of international production. Probit panel data techniques are then applied to a new database of multinational operations in the transition countries of Central and Eastern Europe in order to test the developed hypotheses. The results suggest that, at the sector level, a consistent modelling of FDI flows needs to take into account not only the determinants traditionally considered by the literature but also variables linked to the institutional environment in which the FDI is undertaken.
Liberalizzazione dei mercati, internazionalizzazione delle imprese ed incertezza
ALTOMONTE, CARLO
2000
Abstract
The paper applies the recently developed approach of real option theory of investments, which explicitly models uncertainty, expectations and irreversibility, to the case of foreign direct investment (FDI), integrating the traditional theories of international production. Probit panel data techniques are then applied to a new database of multinational operations in the transition countries of Central and Eastern Europe in order to test the developed hypotheses. The results suggest that, at the sector level, a consistent modelling of FDI flows needs to take into account not only the determinants traditionally considered by the literature but also variables linked to the institutional environment in which the FDI is undertaken.
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