Evaluation of the Investment Development Path concept in selected Baltic Sea Region states: Where are we?

Abstract

In the European Union (EU), there are four Baltic Sea Region (BSR) states – Estonia, Latvia, Lithuania, and Poland – which are interlinked by the following facts: the common moment of obtaining EU membership, a common historical path from communism to democracy, and being part of the BSR. Although the selected countries share common roots, it seems that, in terms of the economic development, they may follow a different path. Investment development path (IDP), a concept developed by J.H. Dunning, stresses that the development of a country is a result of being an active exporter of capital. This paper aims to evaluate the progress of the four selected economies in terms of their IDP. The analysis takes into consideration their peculiar economic determinants. The methods used include quantitative and qualitative methods. Among the qualitative methods, a literature review briefly presents Dunning’s IDP paradigm. The review of existing empirical research highlights the contributions of the paper. The quantitative methods cover the statistical data illustrating the progress of the selected countries in terms of the IDP. The data were obtained from United Nations Conference on Trade and Development (UNCTADStat) and Eurostat. The BSR states under investigation differ in terms of their economic growth. However, they share a common denominator of maintaining the role of importer of capital. The highest dynamics of the growth of the outward stock of Foreign Direct Investment (FDI) was observed in Poland and Lithuania. It is Poland and Estonia, however, that seemingly will climb on the ladder of IDP faster than Latvia and Lithuania. In all cases, these countries deal with higher dynamics of annual growth of Outward Foreign Direct Investment (OFDI) than Inward Foreign Direct Investment (IFDI), which suggests that all are at the third stage of IDI. However complex analysis reveals differences that shed new light on the progress of development paths of these BSR states.