Obstacles to foreign direct investment in Russia

Abstract

Explores the obstacles facing trans‐national corporations (TNC) considering FDI in Russia. Dunning (1994) suggests that countries’ abilities to attract and exploit the potential economic benefits of inbound FDI vary according to their national political, economic and legal cultures, traditions and infrastructures, together with the economic objectives and policies pursued by host governments. This paper seeks to make use of Dunning’s model, in exploring the obstacles to FDI in modern Russia, and their implications for TNCs. The papers’ findings suggest that Russia’s relative lack of success in attracting FDI and exploiting its potential benefits during the 1990s can be attributed to her national infrastructural factors and government policies, as Dunning’s model suggests. Russia’s ability to attract a larger share of FDI in future seems likely to be constrained by national ambivalence towards the benefits of FDI, together with the political and economic realities of her current situation.