F20 - International Factor Movements and International Business: GeneralReturn

Foreign direct investment (FDI) plays a crucial role in the growth and development of transitional economies and especially in countries where domestic capital is insufficient to meet the investment needs of the economy. Albania is a country applying for E.U. integration, so the country's central policies in recent years have brought about a liberalized economic framework and improved conditions for business development, attracting highly sought after FDI. This paper will provide an analysis of FDI in Albania and make a comparative analysis with the Western Balkan (W.B.) countries. The focus of the paper will also be on analyzing some of the critical elements that make these countries attractive to FDI, such as: analyzing the sectoral distribution of FDI stocks, the impact that inflows have had on the development of domestic economies, in creating jobs. FDI flows even though they have been in an upward trend, have not yet reached the desired expectations levels. W.B. countries have some very potential sectors to increase in the future and to be more attractive for FDI, such as tourism, service, transport, agriculture, industry. FDI had a positive impact on Albania's economy and in other Balkan countries. However, the region still needs to make many improvements in implementing institutional reforms, building and operating democratic institutions, improving the infrastructure. All countries need to collaborate to enhance political instability, resolve conflicts, and to focus on improvements and policies to attract potential investors.
Implications for a Central European audience: This paper aims to contribute to increasing the knowledge about the opportunities and potential sectors to invest in the W.B. area. The article may make a positive contribution to the Central European businesses generally and especially to firms that are interested in investing their capital in W.B countries or scholars who currently study the effects of FDI in developing countries. There is an analysis of how public policies can further increase the attraction of FDIs, which is beneficial for public officials aspiring to absorb foreign investments in their area of oversight. The optimal geographical position of Albania and W.B. countries has played an essential role in attracting foreign investments for neighbouring countries and especially European Union countries. Central European countries such as Hungary, Austria, and Switzerland are leaders or significant investors in the region. The distance between host and recipient countries have been a dominant factor of FDI, as well as cultural and linguistic resemblances.

At the end of 2014, the number of firms with an Italian presence in Romania was 39,556, representing 19.33% out of total registered firms and this number is still growing. This article focuses on answering the following question: what kind of Italian firms are investing in Romania and why? Starting from the empirical observation that the number of Italian firms in Romania grew by 6.82% last year, we have used a PESTEL analysis to find the key points characterizing the country, paying attention also to the concept of country brand. From the point of view of Italian firms, we have also analyzed the shifting paradigm of internationalization from a Vertical Foreign Direct Investment model to a Horizontal Foreign Direct Investment model. This paper can be useful for managers and entrepreneurs who are oriented towards investing in Romania following the path of Italian firms.