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3/2025 vol. 323
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RESEARCH PAPER
The Institutional FDI Fitness Theory: Assumptions and an Attempt at Verification for Central and Eastern European Countries
Julia Włodarczyk 1
,
 
Martyna Bieleń 1
,
 
Sylwia Wajnbrener 1
 
 
 
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1
Wydział Ekonomii, Uniwersytet Ekonomiczny w Katowicach, Polska
 
These authors had equal contribution to this work
 
 
Submission date: 2024-08-01
 
 
Final revision date: 2024-11-05
 
 
Acceptance date: 2025-01-07
 
 
Publication date: 2025-09-30
 
 
Corresponding author
Julia Włodarczyk   

Wydział Ekonomii, Uniwersytet Ekonomiczny w Katowicach, Polska
 
 
GNPJE 2025;323(3):88-99
 
Article (PDF)
References (58)
 
KEYWORDS
Central and Eastern Europe
foreign direct investment (FDI)
institutions
institutional FDI fitness theory
 
JEL CLASSIFICATION CODES
ABSTRACT
Foreign direct investment (FDI) plays a crucial role in the economic growth and development of most countries, generating significant interest among researchers and policymakers in its determinants. The institutional FDI fitness theory, which identifies four groups of institutions shaping investment inflows (socio-cultural, education system-related, market, and governmental), has not yet been addressed in the Polish-language literature. This paper outlines the core assumptions of the theory, reviews the relevant empirical studies, and tests its applicability to Central and Eastern European countries over 2004–2020. Using both cross-sectional data analysis methods (as in the original study) and fixed-effects panel data, we find that market institutions play a primary role in attracting FDI to the CEE region. FDI inflows are positively correlated with GDP per capita, total population, urban population, and tax revenues, while governmental, education system-related, and socio-cultural institutions appear to be of marginal significance. The estimates also show that time variables and lagged values of FDI inflows (in panel analysis) are statistically significant. Future research could refine the selection of variables representing all groups of institutions and examine the pace of institutional change as a moderator in the analysed relationship.
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