Economic transition and the sectoral patterns of foreign direct investment

The paper investigates the factors that influence the distribution of foreign direct investment (FDI) across countries of investor-origin and manufacturing industries in Poland. The results confirm the general appropriateness of the basic gravity model formulation for FDI analysis in transition countries, as well as important links between FDI, trade, and labor costs. However considerable diversity across manufacturing industries is found with respect to the extent to which factors such as capital costs and industry competitiveness influence foreign investment activities. Hence, generalizing claims regarding the determinants of FDI flows should be treated with care.