Legal environment as a factor in the inflow of Foreign Direct Investment: Case of Serbia

Abstract

The economic growth and development of a country depend on the inflow of foreign direct investment, and the legal environment factors play an important role in securing it. Compared to other countries in South-Eastern Europe, Serbia has achieved remarkable results in terms of FDI inflows over the last ten years. The research examines the impact of the legal environment on FDI inflows in Serbia. The study was conducted using a quantitative approach and a survey technique based on a structured questionnaire. The basic set of the research consists of the 300 most prominent foreign investors (response rate of 28%) who invested capital in Serbia in the period 2011-2019. The results of the conducted research show that ownership in Serbian companies is the most important factor in the legal environment that influences a foreign investor's decision to invest capital in these companies. The results show that labor legislation, law enforcement, and confidence in the legal system can significantly contribute to a foreign investor's decision to invest capital in Serbia. The legal environment's implications influence investor decisions and shape the overall investment climate of a country. A well-structured and investor-friendly legal framework will increase Serbia's competitiveness and attractiveness for foreign investments.