Internationalization of Firms from Economies in Transition
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Internationalization of Firms from Economies in Transition

The Effects of a Politico-Economic Paradigm Shift

Edited by Mai Thi Thanh Thai and Ekaterina Turkina

This book provides a detailed analysis of how and why firms from economies in transition internationalize and examines the effects of domestic politico-economic factors on this process.
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Chapter 8: Determinants of Bulgarian outward foreign direct investment

Veneta Andonova, Emilia Zankina and Yana Shaleva


This chapter investigates the determinants of Bulgarian outward foreign direct investment (OFDI) and the extent to which well-established theoretical explanations (capital market imperfections, special ownership advantages and institutional factors) complement contingent political factors, such as political risk and the intensity of bilateral foreign relations. While guided by free-market forces, foreign investment decisions by a new democracy that has experienced a complex and prolonged transition are arguably subject to political influences. The erratic pattern of the early and even later years of the Bulgarian economic and political transition went hand in hand with a search for external legitimacy and speculation about the economic implications of political commitments. This exploratory study looks at possible determinants of Bulgarian OFDI, including the influence of bilateral foreign relations and political risk. The evidence reported here is consistent with the predictions of the general theory of foreign direct investment (FDI). For the case of Bulgaria, the contingent political factors studied in this chapter appear to correlate with the stock of Bulgarian outward direct investment. Below, we briefly describe the relevant economic and political dimensions of the Bulgarian transition. In the ensuing section, we present our empirical data, methodology and findings. Finally, we discuss the implications of the research findings. Bulgaria, one of two countries where former communists won the first post-communist elections, witnessed four elections and nine governments in the first seven years of the transition.

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