Historical Legacies as Determinants of Foreign Direct Investment in Bosnia-Herzegovina

This paper examines models for explaining the origins of foreign direct investment in Bosnia-Herzegovina (BiH). BiH is a very interesting case because of its position on the frontier of Europe, a region with a rich cultural history marked by alternating periods of coexistence and violence. Because the country has spent time under the Ottoman, Austro-Hungarian, and Yugoslav flags, particular attention is paid to the role of history in impacting inflows of FDI. Specifically, the models measure the origin-specific advantages enjoyed by firms from other successor states of the hegemonic political entities of the region, and culture, which also favors firms with Slavic, Germanic, and Turkish connections. Five models are specified in order to analyze the origin-effects, with dependent variables defined as cumulative monetary value in 2010 (specified with and without bilateral trade), from 1994-2006, the recession-impacted period 2007-2010, and the total number of transactions. Policy implications include the need for government action to enhance FDI facilitation and overcome remaining barriers for foreign firms. Given that little has been published on FDI in Bosnia-Herzegovina, several future research directions are presented.