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Chapter 5 EMBEDDEDNESS OF ORGANIZATIONAL FDI ATTEMPTS THE MACRO-LEVEL evidence presented in the previous two chapters points to the inadequacy of traditional accounts of FDI, which emphasize economic efficiency. Standard economic and political risk indicators do not predict well which postsocialist countries receive more and which less investment. Rather, analyses of cross- and within-country variation in FDI bring to the fore the relevance of institutions, networks, politics, and culture for understanding FDI flows. Nevertheless, because they treat FDI in the aggregate, as flows of foreign capital, those analyses cannot fully specify what shapes the realization of FDI attempts at the level of firms that participate in these transactions . Macro-level analyses show strong associations between social forces and FDI. Still, to provide further evidence for the argument about the socially constructed relational nature of FDI, it is important to more concretely identify how social networks, cultural understandings, power divisions, and institutional arrangements influence decisions of firms engaged in FDI transactions. With this goal in mind, this chapter shifts the analysis of FDI in postsocialist Europe to the organizational level and examines FDI attempts between investor companies, usually from the West, and host firms from Central and Eastern Europe. I first present a detailed case study of FDI attempts involving an American MNC, a German MNC, and a Slovenian firm. Analyzing this case, I lay out the variety of ways in which social forces influence FDI attempts. I trace the concurrent influences of structures, power, and culture on economic action. Doing so, I show how social forces not only serve as a context for instrumental decision-making or act as a constraint on economic action, but how—by constituting actors’ preferences, goals, and strategies—they provide social foundations of economic transactions. INVESTED TRANSACTIONS: THE INTRICACIES OF FDI ATTEMPTS Slovan, a manufacturer of components used in electrical appliances, grew out of a metalworkers’ manufacturing cooperative, which was founded in a small town in the northwestern part of the Yugoslav republic of Slo- CHAPTER 5 132 venia in March 1946. The factory grew over the years, and in 1958, when Tito’s self-management socialism permitted more decentralization, it began exporting its main product to the United States. In the early 1960s, the company merged with several other similar firms into a state-owned holding company, which established a trading office in the United States. Through this office, Slovan developed a relationship with AmeriCo, a U.S.-based electromechanical products manufacturer that was developing into a multinational corporation. In keeping with these expansion efforts, AmeriCo approached Slovan to establish joint production in the early 1970s. However, during these socialist times, FDI in former Yugoslavia was restricted, and Belgrade did not approve AmeriCo’s request for crossborder cooperation. As one of Slovan’s managers put it, “They [officials in Belgrade] said that we as a socialist country couldn’t mix with the capitalists.” Nonetheless, the two companies remained in contact. According to one of the top managers of Slovan: If we visited the U.S., we also visited AmeriCo. I knew the vice president well. His father was from the Czech Republic and his mother was a Slovenian. He actually wanted to find out about his ancestors in Slovenia. . . . I even tried to look up some things for him. . . . And there was also another person [in the top management of AmeriCo] who was Greek by origin and his wife was from Serbia. She would always serve us slivovitz and real Turkish coffee. Ties that developed over the years between the top executives of both companies were of a personal character, going beyond strictly business relations. With the fall of socialism and the breakup of Yugoslavia in 1991, Slovan separated from the satellite company and started a process of privatization . Consistent with the most common strategy in Slovenia, Slovan decided on a management-employee buyout (MEBO). As explained in chapter 2, postsocialist countries implemented a variety of privatization strategies. Reflecting the socialist self-management tradition and reluctance to sell assets to outsiders, MEBOs were a common practice in Slovenia . Via this privatization method, Slovan employees and management acquired a 53.11 percent ownership share by investing their own privatization certificates. (Underlying MEBOs was a voucher privatization scheme where each Slovenian citizen received certificates that could be exchanged for an equity share in firms. Citizens did not have to pay fees for them.) The other owners of Slovan were the old cooperative that initially...

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