The Impact of Scandinavian Inward Foreign Direct Investment on the Baltic States

Although foreign direct investment (hereinafter FDI) has been the matter of discussion since the early 1970s, it is still one of the most controversial topics in both economic and political terms. The intensity of FDI shows the host country’s openness to the foreign capital, its integration into the international market and economic growth. The proponents of the positive attitude state that foreign capital increases competitiveness and labour productivity in the host country and creates new jobs and the host country adopts new technologies. Other scientists are not so optimistic in respect of FDI impact. Inward FDI may be determined by political decisions of the host government. However, some researchers even point out that stimulation of FDI is harmful for the host economy. FDI promotion is acceptable if indirect initiatives are adopted and an appropriate legal system for controlling multinational corporations’ (hereinafter MNCs) activities exists. It is noticeable that the main negative consequence of activating inward FDI stimulation is that the host economy becomes dependent on a foreign capital over a certain period of time and MNCs have effect on decisions of the host government. Some studies show that the mobility of foreign capital may exist under an imperfect market conditions only. MNCs are likely to invest into economically weak countries benefiting from a low labour cost. Thus, under the present economic conditions, it is important to identify the benefits of FDI for the host country and to analyse MNC motives for investment.