ABSTRACT
This chapter reviews the theories of foreign direct investment (FDI) in general. The theoretical foundations of FDI are rooted in two main streams in the literature. These are the theory of industrial organization, and the theory of international trade. The chapter deals with FDI by firms in developing countries. It includes the eclectic paradigm, also known as Ownership-Location-Internalization paradigm of Dunning, to explain the investment behavior of Turkish firms in post-communist countries in Europe and Euro-Asia. Turkish firms possessed both tangible and intangible assets such as capital, strategic leadership, talented and skilled human resources, and domestic and overseas experience to penetrate these emerging markets. The chapter discusses the patterns of Turkish direct investment (TDI) in Central Eastern Europe (CEE) and Commonwealth of Independent States (CIS) countries and analyzes the type of TDI. Turkey has an advantageous location along the straits that link the Black Sea to the Aegean, which means it has geographical proximity to both CEE and CIS countries.
