Observable and Unobservable Determinants of the FDI Distribution in Russian Food Industry Companies

<p>Food industry plays a key role in each country. That is why the process of globalization makes the problem of ensuring safe production vary important, especially while attracting foreign capital. In this research the two mechanisms of the FDI distribution in Russian food industry companies are discussed. Special econometric tools for this analysis are also proposed. The regional characteristics and the spatial lags (like factor of agglomeration, market potential and others) as determinants of the process are investigated in this research. To test the influence of these determinants on the probability to have more than 10% of foreign capital in a company the hierarchical binary-choice models on a sample of Russian food industry companies (from RUSLANA database, on 2009) are estimated. The logical complexification of a model allows not only to display the regional and subindustrial heterogeneity but also to determine the regions where the effect of some factors is irregular or more tangible and to discover for which subindustries it is significant and in which tendencies are different. According to the results, the hierarchical diffusion of foreign investors is motivated by the seeking of local market and by seeking of the efficiency through lower transportation costs and better investment environment. The local resources in innovations are not significant on this level. When the investors develop new regions they take into account almost all the investigated regional characteristics. These results are reasonable for almost all the most important subindustries, however, some exceptions are observed. The development of transport infrastructure of the region and its spatial lag should be pointed out as one of the most substantial effects on the probability to have the FDI.</p>