Diaspora FDI: Why do Returning Migrants Invest in Their Home Countries and What are the Main Difficulties They Face? The Case of Romania

Abstract

Migrants play a significant role in increasing economic links between their home and adoptive countries. They contribute to increasing trade and increasing capital flows between the respective countries in the form of remittances and direct investment. In the context of Romania, only a trickle of this capital flow is in the form of direct investment, although diaspora direct investment (DDI) may represent a more desirable form for the state than remittances. The purpose of this study is two-fold. On one hand, it aims at investigating why Romanians from the diaspora invest in their homeland and, on the other hand, it seeks to understand why the number of diaspora investors is still so low. The study is based on qualitative content analysis of newspaper articles featuring interviews with diaspora entrepreneurs. We found that decisions to return and invest in Romania were motivated by both push (homesickness, lack of economic opportunities in the adoptive countries, the need for a new challenge, and patriotism) and pull factors (business opportunities and beautiful, attractive places in Romania). The main constraining factors were found to be excessive bureaucracy, people’s mentality, shortage of labor, and other adverse economic conditions. While the findings of this study confirm some of the results posted by previous studies, they also propose some motivations for DDI that were not captured by other works on the subject.