Examining the Applicability of Specific Approaches for Evaluating the Investment Environment in Countries with Transition Economies

Abstract

Theoretical background: When making a decision on foreign investments, it is crucial for investors to have a clear understanding of both the potential of the host country and the risks awaiting them. To date, numerous approaches have been developed for assessing the business environment and investment climate (attractiveness) of countries. These developments are based on the research of international organizations, rating agencies, business schools, scientific and research institutions. Among them there are both universal (e.g. Harvard Business School, The Doing Business, Political Risk Services) and specialized (e.g. Methodology of the Bank of Austria, RAEX Analytics) approaches. The abundance and diversity of methodologies have generated numerous studies aimed at their classification and comparative analysis.

Purpose of the article: The aim of this article is to conduct a comparative assessment of selected specialized methodologies for evaluating the investment attractiveness of countries and classify them according to the Applicability Matrix.

Research methods: The authors reviewed the literature in the field of investment theory and investment climate assessment, as well as materials containing a direct description of the methodologies for assessing investment climate themselves, algorithms for their application and the results of previous evaluations. The application of the system critical analysis method allowed for a comprehensive examination of the selected approaches and determination of their key characteristics, advantages, and disadvantages. The research procedure also necessitated the utilization of expert assessment method to conduct a weighted comparative analysis of the applicability of the methodologies.

Main findings: Within the study, the characteristics, strengths, and weaknesses of the selected specialized methodologies for evaluating investment attractiveness were identified regarding to two key dimensions: information coverage and complexity. The main results include a comparative evaluation of the practical applicability of selected methodologies for assessing the investment climate, as well as their classification into groups with relevant qualitative characteristics according to Applicability Matrix.