The main purpose of this thesis is to provide systematic and rigorous research into the patterns, processes and corporate strategies of Japanese manufacturing MNEs in European transition economies. Understanding why Japanese MNEs decided to initiate production in or to relocate existing factories from Western Europe to CEE at a particular time constitutes our first significant concern. The subject of the examination to follow is to scrutinise local market environments in the CEE region. The quality of both economic and institutional forces embedded in national business environments is clearly paramount importance. In order to determine the appropriate FDI strategy in terms of competitiveness, efficiency, control over vital resources and legitimacy, firms should keep their eyes on the host country’s transition environment. This thesis will also aim to investigate what determines investment decisions by Japanese multinationals at the subnational level and what variables are most important to operating successfully in the CEE region based on a combination of theories. The results will help make crucial practice-oriented implications both for prospective investors and for host-based policy developers.