Foreign direct investment and transition

This article examines the debate on the developmental impact of foreign dir ect investment (FDI). While the most frequent finding within sociology is t hat FDI is harmful or at least less beneficial than domestic investment, mo st who study the transition from socialism or make economic policy in the r egion consider FDI to be a major motor of development. This paper examines the impact of FDI with a novel methodology Rather than employing the standa rd analytic strategy that uses state-level macroeconomic data in a cross-na tional comparison, this article directly compares the performance of foreig n owned firms to domestically owned firms. In the analysis six hypotheses d erived from this debate on the role of FDI are tested with logistic regress ion on two large random sample surveys of Hungarian firms The findings supp ort the position that foreign direct investment is beneficial for the recip ient country. In addition, they support the idea that foreign owned firms a re more beneficial than domestically owned firms.