Foreign Portfolio Investment and Financial Constraints of Small Firms

Abstract

The article examines the impact of Foreign Portfolio Investment (FPI) and constrains on small firms. FPI has significant influence on a country’s economic development and
improvement. In spite of the fact, that the degree of constraints differ across counties and firms, it is mostly small firms that suffer constrains from foreign investment – constraints that are significantly lower in richer, larger, and faster-growing countries.
This paper seeks to shed light on the factors that bring foreign investors to Georgia; on the motives of these investors; on some of the constraints and barriers evidenced in the Georgian investment environment; and on the amount FDI and FPI flow in Georgia in last years. Finally we summarize and provide some recommendations on how to increase the competitiveness of the country’s investment climate in retaining existing and attracting new foreign and domestic investors.