142 Post-Soviet Geography and Economics, 2001, 42, No. 2, pp. 142-152. Copyright © 2001 by V. H. Winston & Son, Inc. All rights reserved. Distribution of Foreign Direct Investment among Transition Economies in Central and Eastern Europe Joel I. Deichmann 1 Abstract: This paper presents a regression model designed to explain the distribution of for- eign direct investment (FDI) in the countries of Central and Eastern Europe. Locational vari- ables are identified from geography and economics literatures on location theory and foreign direct investment. The dependent variable is cumulative value of investments in each host country, accounting for initial outlays as well as subsequent investments and reinvested prof- its. The results make it possible to identify the most important determinants of FDI in the region (trade volume, followed by investment climate and density of transportation infra- structure). Journal of Economic Literature, Classification Numbers: C10, E22, O16, O52. 1 figure, 3 tables, 32 references. INTRODUCTION espite the recent dramatic increase in the entry of foreign capital into Central and East- ern Europe (CEE), foreign direct investment (FDI) into the region continues be over- looked in most assessments of the global economy. For example, summarizing investment data through 1995, the most recent edition of Dicken’s Global Shift (1998) offered little cov- erage of the region. However, the magnitude of inward investment flows is easily recognized in more recent data. According to Business Central Europe (2001), the cumulative value of FDI in CEE 2 is $104 billion. In comparison, the cumulative value of such projects as of 1990 stood at less than one billion U.S. dollars. The hundredfold increase in investment stock over less than 10 years provides the main justification for this research. As illustrated in Figure 1, the distribution of foreign direct investment within the region is highly asymmetrical. By value, regional leaders include Poland, Hungary, Russia, and the Czech Republic, receiving $30 billion, $18.8 billion, $18.6 billion, and 15.1 billion, respec- tively (Business Central Europe, 2001). Other countries, such as Bulgaria, Estonia, Lithua- nia, Latvia, Slovakia, and Slovenia, have each received less than three billion dollars in foreign capital. What factors explain this pattern? The present paper identifies location fac- tors from the existing literature on foreign direct investment and tests them statistically in the context of Central and Eastern Europe. 1 Assistant Professor, International Studies Program, Bentley College, 175 Forest Street, Waltham, MA 02452- 4705 (email: jdeichmann@bentley.edu). An earlier version of this paper was presented at the Annual Meeting of the Association of American Geographers in Pittsburgh, PA on April 6, 2000. The author gratefully acknowledges help- ful comments from participants at the meetings, Dr. Sean McDonald, and anonymous reviewers. 2 The Central and Eastern European countries examined in this study include Albania, Belarus, Bulgaria, the Czech Republic, Croatia, Estonia, Hungary, Latvia, Lithuania, Macedonia, Moldova, Poland, Romania, Russia, Slo- vakia, Slovenia, and Ukraine. Comparable data for the remaining states were not available. D