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No abstract

Because of the scarcity of capital the attraction of FDI became an objective which was followed with topmost priority in many post-socialist countries. But how effective were the introduced incentives? The comparative analysis shows that in spite of the advantageous effects of FDI on the transition process, the introduction of tax concessions appears to be of little value. No significant relationship between tax incentives and the level of FDI could be found. This, however, does not mean that the development of FDI was detached from political control. The way in which privatization took place had a big impact and a comparatively low general level of taxes influenced investments positively. Beyond this the general success of transformation was of importance for the attractiveness of a country.

The paper examines whether and how the increasing internationalization of rms impacts on the operation of a co-ordinated market economy. Following the tenets of agency theory, it assumes that an emerging market for corporate control changes the monitoring mechanisms that oversee management. Since Anglo-American forms of monitoring are usually associated with a higher return for investors compared with Continental European rms, a change in the distribution of the net value added of rms is expected. Using nancial data on fty-nine large German companies, the paper shows that the emerging convergence of German corporate governance practices to Anglo-American standards has had a weak, but signi cant, impact on the distribution of net value added. This is in contrast to the impact of the internationalization of rms on product markets, which does not have an effect. Since the market for corporate control is, however, still underdeveloped in Germany, the main effects remain to be seen.