Multinational Enterprises, Foreign Direct Investment and Property Capital Flows in Transitional Economies

This paper argues for the development of a theory that explains the evolution of property capital flows in Central European transitional economies. The foundation for a property investment development path (PIDP) theory primarily builds on John Dunningís extensive work on multinational enterprise activities and his seminal theory on the investment development path. Recent research on transitional economies, coupled with current work in economic growth theories, foreign direct investment research, and international capital markets, also support empirical research of a PIDP theory. However, the body of economic and financial literature does not specifically address several critical roles of property development and property capital flows in transitional and developing economies. An empirically based PIDP theory attempts to bridge the gap in the economic growth and international business literature and expand our understanding of property capital flows in transitional economies. The PIDP theory primarily seeks to answer a fundamental question: why property capital flows follow an evolutionary path in response to multinational enterprise (MNE) activities that structurally change local property markets in transitional economies. A secondary goal of the PIDP theory seeks to identify economic determinants in transitional economies that predict rational property capital flow demands, defined as those that benefit banks, developers, construction firms, and policy makers.