Assessment of Attractiveness of the Baltic States for Foreign Direct Investment: The TOPSIS Approach

Abstract

Foreign investment is one of the driving forces of a country’s economy. The global foreign direct investment (FDI) flows in 2020 amounted to USD 1 trillion, but FDI distribution varies from country to country. Here, the questions arise as to what determines the choice of foreign investors, what the countries can do/are doing to attract FDI, and which Baltic states are the most attractive for FDI. Based on the scientific literature analysis, the definitions of FDI and the attractiveness for FDI, as referred to in the empirical study, are reviewed; the factors affecting FDI are singled out, and the methods/models that are applicable for assessing FDI are investigated. The major purpose of the article is to assess the attractiveness of the Baltic states for foreign direct investment. Research methods: comparative analysis of the concepts and methods available in the scientific literature, secondary data analysis, statistical data processing, and multi-criteria evaluation methods. The results of the assessment of the attractiveness of the Baltic states for foreign direct investment that were determined by applying the TOPSIS multi-criteria evaluation method helped to determine a country’s position in relation to its neighbors and revealed the criteria that weaken or strengthen this position. The results of the research can help the leaders of the states to select the relevant measures to improve their state’s FDI attractiveness in relation to other states.