In his book “The world is flat”, Thomas Friedman is analyzing globalization, mainly in the early 21st

188 Pages·2017·1.84 MB·English

U M
NIVERSITY OF ACEDONIA
Department of Balkan, Slavic and Oriental Studies

FDI Determinants to Transition Countries.
A CAGE Model Approach.
The Case of Serbia.

N G
ATASA RUJIC

A thesis submitted for the degree of
Doctor of Philosophy
in the Department of Balkan, Slavic and Oriental Studies
of University of Macedonia

Thessaloniki, Ferbuary 2018
FDI Determinant to Transition Countries.
A CAGE Model Approach.
The Case of Serbia.

Supervisors: Dimitrios Kyrkilis
Professor
Dean of the Faculty of Economic and Regional Studies
University of Macedonia

Harry Papapanagos
Professor
Head of the Department of Balkan, Slavic and Oriental
Studies
University of Macedonia

Athanasios Koulakiotis
Assistant Professor
Department of Balkan, Slavic and Oriental Studies
University of Macedonia

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“Ko zna sta te tamo ceka
u maglama iz daleka.
Al’ ako se i pozlatis,
il’ sve tesko,
gorko platis,
uvek idi samo napred.
Nemoj nikad da se vratis.”

Posveceno mojim roditeljima
To my parents

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FOREWORD AND ACKNOWLEDGEMENTS

This doctoral journey has been an interesting experience for me. During all this time, I
have had the great fortune of meeting many inspiring people who have encouraged,
motivated and guided me in my journey across the academic world. I would hereby
like to thank them all for their generous support.

First and foremost I want to thank my supervisor Professor Dimitrios Kyrkilis. I
appreciate all his contributions of time, ideas, and funding to make my Ph.D.
experience productive and stimulating. Mr. Kyrkilis encouraged me to explore
domains of knowledge that were totally new for me, when I started the research
process. I am also obliged to him, for all the opportunities he provided me to meet
knowledgeable and interesting people by participating in international conferences in
different countries. His guidance and support has been definitely precious during this
whole process.

I am especially thankful to my committee members. Firstly, to Professor Harry
Papapanagos, who took time from his busy schedule to read my work and offered
useful suggestions for its improvement. Then, I am highly grateful to Professor
Athanasios Koulakiotis. It has been a fruitful learning experience for me to follow
your recommendations in developing a model for my dissertation. I would also like to
thank the other four members of my oral defence committee, Mrs. Konstantina
Kottaridi, Mr. Yannis Hajidimitriou, Mr. Pantelis Pantelidis and Mr. Spyros
Roukanas, for their time and insightful questions.

The completion of this doctoral dissertation would not have been possible without the
generous support and financing that I received from the Hellenic State Scholarship
Foundation (I.K.Y).

My parents, Nikola and Zorica Grujic, deserve special thanks for always supported
me in this journey. Words can not express how grateful I am to my family. I love
them so much, and I would not have made it this far without them. Also, I would like
to specially mention my brother and my sister, and I know that they must be very
happy on the completion of my doctoral degree.
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Now, my thoughts turn to an important person in my life. Nikolaos! I feel lucky that I
met you. Thank you for supporting me for everything, and especially I can’t thank
you enough for encouraging me throughout this experience. I hope that God will be
merciful on us and bless us with time and love in order to explore the journey of life
and discover a future together.

Natasa Grujic
February 2018
Thessaloniki, Greece

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CONTENTS

CHAPTER I. Introduction
1.1. Globalization vs. Semiglobalization 11
1.2. A CAGE Model Approach 17
1.3. Scope of the Thesis 24

CHAPTER II. Theoretical Background
2.1. Theories of FDI 30
2.2. The Market Transaction Cost Approach 46

CHAPTER III. Foreign Direct Investment in Serbia
3.1. FDI in Serbia since 1990 54
3.2. Law on Foreign Investments in Serbia 58
3.3. FDI in Serbia: Stylized Facts
3.3.1. Distribution of FDI inflows to Serbia by manufacturing and
services sectors 60
3.3.2. Distribution of FDI inflows to Serbia by home country 63

CHAPTER IV. Framework Analysis of “Distance”. Theory and Empirical
Considerations
4.1. Framework Analysis of Cultural Distance
4.1.1. Cultural Frameworks 81
4.1.2. Hofstede’s Cultural Dimensions 82
4.1.3. Limitations of Hofstede’s model 83
4.1.4. Other Cultural Frameworks 84
4.1.5. Effects of National Cultural Differences 87
4.1.6. Variables of Cultural Distance 89
4.1.7. Hypothesis about the Relationship between Cultural Distance
and FDI 92
4.2. Framework Analysis of Institutional Distance
4.2.1. Variables of Institutional Distance 98
4.2.2. Hypothesis about the Relationship between Institutional
Distance and FDI 102
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4.3. Framework Analysis of Geographic Distance
4.3.1. Variables of Geographic Distance 106
4.3.2. Hypothesis about the Relationship between Geographic Distance
and FDI 109
4.4. Framework Analysis of Economic Distance
4.4.1. Variables of Economic Distance 110
4.4.2. Hypothesis about the Relationship between Economic Distance
and FDI 112

4.5. Hypotheses about the relationship between Distances and FDI at industry
level 114

CHAPTER V. Model, Methodology and Data
5.1. Construction of Approximations 117
5.2. Econometric Modeling 123
5.3. Data Sampling 125

CHAPTER VI. Empirical results
6.1. Country Level 130
6.2. Industry Level 131

CHAPTER VII. Conclusions 142

REFERENCES 164

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LIST OF TABLES

Tables- Chapter I

Table 1.1. The CAGE framework at country and industry level 24

Table- Chapter III

Table 3.1. FDI inflows, 2001-2007, millions of US Dollar 56
Table 3.2. FDI inflows by mode of entry, 2000-2014, millions of Euro 57
Table 3.3. FDI inflows, 2010-2016, millions of US Dollar 58
Table 3.4. Net FDI in cash by country of origin, 2000-2009, millions of US Dollar 64
Table 3.5. FDI inflows to Serbia, 2000-2012, millions of US Dollar 65
Table 3.6. FDI inflows to Serbia, 2000-2014, millions of Euro 66
Table 3.7. Russian OFDI in total, billions of US Dollar 72

Table- Chapter IV

Table 4.1. World Bank Governance Data to measure ID 102

Table- Chapter V

Table 5.1. Principal Component Analysis versus Exploratory Factor Analysis 118
Table 5.2. Factor Analysis/ Correlations 119
Table 5.3. Factor loadings (pattern matrix) and unique variance 119
Table 5.4. Factor Analysis/ Correlations 120
Table 5.5. Rotate factor loadings (pattern matrix) and unique variance 120
Table 5.6. Factor rotation matrix 120
Table 5.7. Scoring coefficients (method regression, varimax rotated factors) 121
Table 5.8. Aggregation of the manufacturing industry according to technological
intensity and based on NACE Rev.2. 127
Table 5.9. High-tech knowledge-intensive services 128

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Tables- Chapter VI

Table 6.1.Linear regression at country level with Hofstede Type Cultural Index 130
Table 6.2. Linear regression at country level with Kogut-Singh Type Formula 131
Table 6.3. Linear regression for manufacturing sector with Hofstede Type Cultural
Index 132
Table 6.4. Linear regression for manufacturing sector with Kogut-Singh Type
Formula 132
Table 6.5. Linear regression for services sector with Hofstede Type Cultural Index133
Table 6.6. Linear regression for services sector with Kogut-Singh Type Formula 134
Table 6.7. Linear regression for medium-high technology industrial subsector with
Hofstede Type Cultural Index 135
Table 6.8. Linear regression for medium-high technology industrial subsector with
Kogut-Singh Type Formula 135
Table 6.9. Linear regression for low technology industrial subsector with Hofstede
Type Cultural Index 136
Table 6.10. Linear regression for low technology industrial subsector with Kogut-
Singh Type Formula 137
Table 6.11. Linear regression for low knowledge intensive service sector with
Hofstede Type Cultural Index 138
Table 6.12. Linear regression for low knowledge intensive service sector with Kogut-
Singh Type Formula 138
Table 6.13. Linear regression for high knowledge intensive service sector with
Hofstede Type Cultural Index 139
Table 6.14. Linear regression for high knowledge intensive service sector with Kogut-
Singh Type Formula 140

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LIST OF FIGURES

Figures- Chapter III

Figure 3.1. FDI inflows to Serbia & Montenegro, 1992-2000, mill of US Dollar 55
Figure 3.2. FDI structure in Serbia for the period 2000-2009 57
Figure 3.3. FDI inflows to manufacturing and services sector 61
Figure 3.4. FDI inflows to manufacturing subsectors 62
Figure 3.5. FDI inflows to services subsectors 62
Figure 3.6. Austrian OFDI in total and to Serbia, millions of US Dollar 67
Figure 3.7. German OFDI in total and to Serbia, millions of US Dollar 69
Figure 3.8. Greek OFDI in total and to Serbia, millions of US Dollar 70
Figure 3.9. Italian OFDI in total and to Serbia, millions of US Dollar 71
Figure 3.10. USA OFDI in total, 2000-2013, billions of US Dollar 74
Figure 3.11. UAE OFDI in total, 2000-2013, millions of US Dollar 77

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