Strategic Investment Decisions by Western Firms in Ukraine

The transition to free market economy in Ukraine has the country entering a period of discontinuous change. Much of the necessary infrastructure for a free market economy is missing. Enforced segegation from the rest of the developed world has resulted in inherently diiferent socio-cultural beliefs. The economy is in crisis. There is a lack of reliable statistical data, invalidating the use of traditional matrix-based planning tools. Yet there has been a significant level of Western investment in Ukraine since liberalisation In many instances, this has involved "high commitment" modes of operation (Johanson and Vahine 1977). Research into international entry and expansion decisions from macro-economic, strategic, behavioural and marketing perspectives differs as to the relative weight which it accords to exogenous and endogenous influences. However, a recurrent theme is that uncertainty increases risk. Traditional "stage" models of internationalisation would suggest that the level and nature of foreign investment in Ukraine is counter-intuitive, given the levels of uncertainty. This paper explores the entry and expansion decisions which Western firms are making in Ukraine. It seeks to understand why firms make "high commitment" investments in markets in transition. Moreover, it looks at the ways in which firms use relationships in the home and host market to reduce the risks of strategic investment decisions in Ukraine.