Successful Industry Building in Transition Countries: Foreign Direct Investment or Local Effort?software Industries of Bulgaria, Estonia, and Romania

The work examines the grounds for successful industry development in transition economies, focusing on the two types of ownership: foreign and domestic. The distinction is thus made between industries that are predominantly based on foreign direct investment or on local entrepreneurship, with the aim of establishing which of these contributes more to the development of the local economy and human capital. The method of analysis focuses on case studies of the software industry in three transition countries - Bulgaria, Estonia and Romania, representing different variations of the types of industry ownership. For the purpose of establishing the most successfully developed industry, four factors /groups of factors are analyzed: industry size; production linkages and knowledge transfer; specialization, value-added and innovation; and employment conditions. It is shown that the foreign-owned industries of Estonia and Romania have developed more successfully than the local-owned Bulgarian industry. It can be implied that foreign-owned industries, in particular knowledge-intensive ones like the analyzed software industry, provide better chances for development than local ones.