FDI in Balkan Countries: The Role of EU Accession on FDI Attraction

Foreign Direct Investments (FDI) have heterogeneously increased across Balkan countries over the last three decades. We investigate one likely source of this heterogeneity by using information on 9,185 greenfield FDI locating in 8 Balkan countries from 84 origin countries worldwide over the 2003--2019 period. Notably, we investigate the role of the accession to the European Union in determining the probability that an FDI will locate in one specific Balkan country. In doing so, we control for standard FDI determinants such as market size, openness to trade, wages and governance as well as different forms of co-location between the new investment and those previously located in the same host country. We stratify our sample in terms of FDI origin countries, distinguishing between EU and non-EU investors. Overall, EU accession appears to be associated with positive gains in FDI. This result appears to be driven by European investors, while non-EU MNEs do not seem to be affected by the EU membership of potential destinations. To our knowledge, this is the first study to address the issue of FDI determinants in Balkan countries including such a comprehensive set of regressors and exploring country-of-origin heterogeneity at the investment level, while dealing with the hot topic of the EU accession