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Foreign Direct Investment into the Russian Market

After years of a communistic system with a closed economy, Russia has become a very attractive market with high potential for foreign direct investment, however, it is a risky investment destination.

Market conditions are changing rapidly in Russia, it is important for any potential newcomer to have relevant, up-to-date information on the investment environment and potential problems which may face in the new market.

The investment climate in Russia is continuously assessed and evaluated by various authorities in different countries. These repeated evaluations may help to identify new problems, as well as solve existing ones; therefore, we considered our thesis to be of interest for both existing companies and potential newcomers into the Russian market.

The objective of this thesis is to define and describe the existing problems and difficulties that Swedish direct investors come across when investing into the Russian market. We aim to illustrate these problems with examples and provide recommendations on how foreign companies can avoid these struggles. We are using qualitative methods in our study in order to evaluate the problems foreign companies come across in Russia.

The thesis is based on both primary and secondary data. Face-to-face interviews with the representatives of Swedish companies are our primary data sources. News articles, previous research papers and literature on the subject are used as secondary data sources. The general conclusion of our thesis is that even though the political and economical environment in Russia is considered to be stable the bureaucracy, cultural barriers, and transparency are the main problems for foreign investors.

Possible misinterpretation of information due to different level of cultural context, short-term orientated cooperation together with little knowledge of the market can result in interruption of business flow in a company.

It is therefore important for the foreign investors entering the Russian market to be well prepared with current knowledge of the investment environment, an understanding of the host-country’s culture and have a strong strategy for continuous development.
Source: Stockholm University
Author: Bergefall, Lina | Nowak, Olga | Romert, Love

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