«The Political Regime as a Determinant of Inward Foreign Direct Investment: The case of Western Balkans Transition Economies» By Eirini Triarchi A thesis submitted for the degree of Doctor of Philosophy to the Department of Balkan, Slavic and Oriental Studies, University of Macedonia Supervisor: Professor John Marangos This thesis submitted for the degree of Doctor of Philosophy to the Department of Balkan, Slavic and Oriental Studies, University of Macedonia Members of Advisory Committee I. John Marangos (Supervisor) Professor, Department of Balkan, Slavic and Oriental Studies of School of Economics and Regional Studies, University of Macedonia II. Aristidis Bitzenis Professor, Department of International and European Studies School of Social Sciences, Humanities and Arts, University of Macedonia III. Athanasios Koulakiotis Associate Professor, Department of Balkan, Slavic and Oriental Studies School of Economics and Regional Studies, University of Macedonia Members of Review Committee I. John Marangos (Supervisor) Professor, Department of Balkan, Slavic and Oriental Studies of School of Economics and Regional Studies, University of Macedonia II. Aristidis Bitzenis Professor, Department of International and European Studies School of Social Sciences, Humanities and Arts, University of Macedonia III. Athanasios Koulakiotis Associate Professor, Department of Balkan, Slavic and Oriental Studies School of Economics and Regional Studies, University of Macedonia IV. Kostas Karamanis Associate Professor, Department of Accounting and Finance, School of Economics and Administrative Studies, University of Ioannina V. Nikolaos Mylonidis Professor, Department of Economics, School of Economics and Administrative Studies, University of Ioannina VI. Vasilios Panagou Professor, Department of Accounting and Finance, School of Administrative, Economics and Social Sciences, University of West Attica VII. Theodoros Simos Professor, Department of Economics, School of Economics and Administrative Studies, University of Ioannina [ii] Declaration I hereby declare that the work submitted is mine, and that I did not use other sources or resources than stated for its preparation. I declare where I have made use of another’s work, I have attributed the source(s) by citations and references, and that this dissertation has not been submitted elsewhere for examination purposes or publication. Eirini Triarchi October, 2020 Copyright © Eirini Triarchi, 2020. All rights reserved [iii] Acknowledgements First and foremost, I would like to express my deepest gratitude to my supervisor, Professor John Marangos for the continuous support, encouragement, and patient guidance provided generously to me throughout the years of my research. His integral view on research and persistence on providing high-quality work impressed me and motivated me to learn extensively from him. Without his indispensable suggestions and immense knowledge, I could have never completed this work. I also feel honored to have had the opportunity to co-author papers with him published in refereed journals. I sincerely appreciate the insights I received that provided me with a valuable scientific background. My special words of thanks should also go to the members of my PhD committee, Professor Aristeidis Bitzenis and Associate Professor Athanasios Koulakiotis for their cooperation, contribution, insightful comments, and expert support. I am indebted to give a special appreciation to Associate Professor Kostas Karamanis for encouraging me to continue my PhD studies and fulfil this challenging dream. A special thanks to my colleagues Lecturer Nikolaos Arnis, Assistant Professor Georgios Kollias and Lecturer Paraskevi Pappa for their friendship, collegial cooperation, and moral support. Above all, I would like to thank my parents and my siblings for providing me with unfailing support and continuous encouragement to achieve my personal goals. Finally, my gratefulness for my husband whose trust, understanding and patience gave me the strength to complete my PhD studies. I dedicate this dissertation to my beloved family. Thank you, Eirini Triarchi [iv] Abstract This study analyses the political regime as a determinant of inward FDI. Above all, it examines the significance of the political system along with specific factors in stimulating or deterring FDI inflows in European transition economies. The sample countries consisted of those of the Balkan area that are non-EU members, thus the Western Balkan countries of Albania, Bosnia and Herzegovina, Kosovo, North Macedonia, Serbia and Montenegro. The dissertation employs literature review to construct a theoretical framework. The literature review distinguishes certain factors that contribute to the institutional stability and credibility of host countries and as such, to the rise of FDI inflows. These political determinants are the property-rights protection, the signing of Bilateral Investment Treaties, human rights consisting of political participation rights, civil liberties and labour rights, and the quality of governance including the six dimensions of voice and accountability, political stability and absence of violence/terrorism, government effectiveness, regulatory quality, the rule of law, and control of corruption. The theoretical analysis of the political system in WB is based beyond the published studies, on official reports and policy studies over countries transition status. The design of research's empirical model includes the variables that are related to the protection of foreign investors and measure the quality of governance along with the variable of political regime. The empirical analysis uses a panel dataset of the variables of interest for a period 1996-2018, across the six countries. Since European transition economies experience a new political reality, involving in the dispute of the relation between the political system and inward FDI specific features of host countries political surroundings, the extraction of unambiguous results is expected. The findings of this dissertation shed more light in the political system- inward FDI nexus, contributing to the existing literature and providing a framework for transition economies to overcome specific political issues for achieving inward FDI’s growth and developed as FDI destination. Key Words: Foreign Direct Investment, inward FDI, Political regime, Political system, Political determinants, Transition economies, Western Balkans, Governance, Bilateral Investment Treaties. [v] Contents List of Figures........................................................................................................................ 3 List of Tables ......................................................................................................................... 5 List of Maps .......................................................................................................................... 6 Acronyms and Abbreviations.................................................................................................... 7 Chapter 1. Introduction and Overview ................................................................................... 10 1.1 Problem Statement ...................................................................................................... 10 1.2 Purpose of the Research ............................................................................................... 12 1.3 Significance of the Research ......................................................................................... 13 1.4 Research Design ........................................................................................................... 14 1.5 Research Questions ...................................................................................................... 16 1.6 Limitations of the Research .......................................................................................... 17 1.7 Operational Definitions ................................................................................................ 17 1.8 Structure of the Dissertation ........................................................................................ 18 Chapter 2. The Political Regime as a Determinant of Inward FDI: A literature review ........... 20 2.1 Introduction .................................................................................................................. 20 2.2 A review of FDI determinants literature ....................................................................... 21 2.3 Types of Political Regimes: Current Developments ...................................................... 30 2.4 Political Regimes, Political Determinants and Inward FDI ............................................ 35 2.4.1 Political regimes and FDI........................................................................................ 35 2.4.2 Political Determinants and Inward FDI .................................................................. 40 2.5 Concluding Remarks ..................................................................................................... 56 ANNEX I .................................................................................................................................. 58 Chapter 3. The Transition economies of Western Balkans as host countries for FDI: A Theoretical Analysis ................................................................................................................ 71 3.1 Introduction .................................................................................................................