FDI determinants in an idiosyncratic country. A reappraisal over the Russian regions during transition years

Abstract

We investigate the factors attracting FDI into highly diversified Russian regions during the phase of transition, and verify the impact of transition experience on the current FDI inflow. Using cross-sectional and panel data, we demonstrate that the highly inhomogeneous investment pattern is explained, in addition to classical demand factors, by specific economic and socio-institutional regional characteristics. Russia appears as an idiosyncratic country where foreign investors seek a stable social and institutional context. Using recent FDI data we show that transition experiences influence current FDI inflow, particularly when the strength of the institutional environment and availability of infrastructures are taken into account.