Abstract
This article looks at multinational investments in Central and Eastern Europe from a relational matrix perspective. The matrix posits a set of business relationships as outcomes of environment, regulatory or cognitive, and cluster valence combinations of power, urgency, and legitimacy. BP's pursuit of petroleum reserves leading to the venture with Russia's TNK is offered as a case study pointing to two general propositions relating the conduct of global firms in the region. Data analysis relating foreign direct investment with degrees of perceived corruption supports the propositions of opportunistic behavior and acceptance of opaque environments by global petroleum companies. The legitimacy construct is shown to be most prone to erosion, and its diminution impacts a firm's operating flexibility.
Notes
Note. High: three cluster dimensions; medium: two cluster dimensions; low: one cluster dimension.
Note. In Russia and Ukraine, more than 20% of FDI is from Cypress. Source: CEIC Data Manager.
Note. The table reports estimated regression coefficients and p-values (in parentheses) for regression that investigates the determinants of FDI in Eastern Europe and the former Soviet Union. The model uses panel data for 26 countries from 2000 to 2008. The dependent variable is FDI/capita in euros. Because of incomplete data on perceived corruption, N = 217.
*Significance at the .05 level; **significance at the .01 level. R 2 = .528.
In 2006, with the completion of the Baku-Ceyhan pipeline, profits were repatriated. The stock of FDI decreased from $12 billion at the end of 2005 to $6.6 billion at the end of 2007. With the planned construction of the Nabucco pipeline, Azerbaijani officials expect a significant increase in FDI.