From Communists to Foreign Capitalists: The Social Foundations of Foreign Direct Investment in Postsocialist Europe

Appendix on Method and Data Sources

APPENDIX ON METHOD AND DATA SOURCES How does a lone researcher cover the vast territory of postsocialist Europe? There is an elective affinity between the methodological approach to study social foundations of foreign direct investment in Central and Eastern Europe and an attempt to get at the multidimensionality of economic organization and transformation. Rather than rely on one dataset and a single analytical technique, I adopted a broadly comparative approach based on multiple levels of analysis, using multiple sources of data and multiple methods. COUNTRY COMPARISONS Most previous research on postsocialist Europe relies on qualitative case studies of a few countries, which is a fruitful way to inductively develop explanations of postsocialist transformations. For instance, in American sociology Hungary has been the most studied postsocialist country (Stark 1992, 1996; Róna-Tas 1994, 1997; Böröcz 2000), sometimes compared to the Czech Republic, Slovakia, or Poland (Eyal, Szelényi and Townsley 1998; Stark and Bruszt 1998; King 2001). In addition, anthropologists Katherine Verdery (1996b, 2003) and Gerald Creed (1998) studied postsocialist transformations by conducting ethnography of Romanian and Bulgarian villages, respectively. Building on these mostly qualitative studies, my goal was to determine the patterns of postsocialist transformations across Central and Eastern Europe. Thus, my study includes the following eleven countries: Bulgaria, Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Romania, Slovakia, and Slovenia. Table A.1 presents their basic profiles. These are all the postsocialist countries that had started negotiations for EU membership by 2002 and all can be rightfully considered advanced postsocialist states. It is likely that the patterns of transformation in Russia and the Commonwealth of Independent States (CIS) and southeast Europe have been different (King and Szelényi 2005), so my findings may not be generalizable to the other postsocialist countries. Nevertheless, while recognizing the specificities of these countries (in particular the civil war that southeastern Europe experienced, and the greater endowment with natural resources in Russia and CIS that may attract foreign investors), researchers studying FDI in these countries would benefit from considering the importance of privatization policies, political commitment to market reform, state legitimization of FDI practice, and pressures from international organizations. The sociological account of FDI in Central and Eastern Europe presents significant methodological challenges. Not only does the embeddedness perspective suggest social-structural (i.e., network and institutional), political and cultural variables as explanatory forces, but to establish the explanatory power of this perspective, we also need to examine its strength relative to the alternative risk- TABLE A.1 Central and Eastern Europe: Basic Characteristics Bulgaria Croatia Czech Estonia Hungary Latvia Lithuania Poland Romania Slovakia Slovenia Republic Surface area km2 111,000 56,540 78,870 45,230 93,030 64,590 65,300 312,700 238,400 49,030 20,270 Population (millions) 7.8 4.4 10.2 1.3 10.1 2.3 3.4 38.2 21.7 5.4 2.0 Life expectancy at 72.4 75.4 75.7 71.6 72.6 71.5 71.9 74.5 71.3 74.0 76.6 birth (years) School enrollment, 41.1 30.8 43.2 65.1 59.6 74.3 73.2 61.0 40.2 36.1 73.7 tertiary (% gross) GNI per capita, 2,760 6,820 9,170 7,080 8,370 5,460 5,840 6,140 2,950 6,480 14,820 Atlas method (current $) Agriculture % GDP 10.8 8.2 3.4 4.3 3.8 4.1 5.9 5.1 14.3 3.6 2.5 Services % GDP 59.3 61.6 58.0 66.9 65.0 73.3 61.3 64.0 50.7 66.7 62.3 Exports % GDP 58.0 47.5 71.2 78.4 65.7 44.1 52.3 37.6 35.9 76.8 60.2 Imports % GDP 68.2 55.7 71.7 86.1 68.8 59.7 59.4 39.6 45.0 79.5 61.4 Internet users per 283.5 293.3 469.8 496.7 267.1 350.2 281.8 265.7 207.5 422.9 475.7 1,000 people Source: World Bank Development Indicators for 2004. METHOD AND DATA SOURCES 225 and-return perspective on FDI. This suggests that the number of explanatory variables is large relative to the number of country cases available to compare. To address this issue I extended the analyses over time (chapter 3) and disaggregated the country FDI flows...