Foreign Direct Investment in the Czech Republic: The Role of Origin Effects and Government Promotion Abroad

Abstract

This paper examines country-of-origin effects accounting for the Czech Republic's accumulation of $60 billion in FDI during the years surrounding accession to the European Union. Careful attention is paid to CzechInvest's assertive marketing through offices abroad. Government promotion initially drew investment from firms in countries relatively less familiar with the Czech Republic, and while its importance is confirmed empirically, it remains inferior to agglomeration and trade flows, and is followed by EU membership. The inquiry yields substantial consistency across model specifications with variables that eclipse other conventional explanations of FDI including market factors, exchange rates, and geographical distance.