The geography of foreign investment in the EU neighbourhood

This paper aims at investigating the drivers of Multinational Enterprise (MNE) investment in countries linked to the ‘core’ of the European Union (EU 15) by different degrees of functional, economic and political integration: the EU ‘new’ Member States, accession and candidate countries, European Neighbourhood Policy countries, as well as Russia. Understanding the drivers of foreign direct investment (FDI) in these countries is highly relevant in consideration of their increasing integration into the global market and the strong influence exerted by the EU on this process. By employing data on individual greenfield investment projects for the period 2003 to 2008, this paper aims to disentangle the drivers of FDI in these countries for different industrial sectors, business functions and investment origins. The empirical results suggest that FDI in the area tends to follow market‐seeking and efficiency‐oriented strategies, and show path‐dependency and concentration patterns that may reinforce core‐periphery development trajectories in the EU neighbourhood.