Impact of ownership and location factors on service multinationals' internalisation

Abstract

Foreign direct investment in the service sector has been gaining importance in the past decade as more countries transform themselves into post-industrialised economies. The transition from a centrally planned economy to market-based economy has generated a surge of foreign direct investment from industrialised countries to Central and Eastern European Countries. This paper examines the impact of ownership and location factors on the extent of internalisation for service multinationals seeking to enter into the Czech Republic, Hungary, and Poland, as these countries launch their economies towards increased privatisation, deregulation, and liberalisation. Using foreign direct investment data of 76 firms during 1990–2000, we find significant support for our main hypotheses.