Spillovers from foreign direct investment in Central and Eastern Europe

Balazs Szent-Ivanyi () and Gábor Vigvári
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Gábor Vigvári: Corvinus University of Budapest Department of World Economy, Budapest, Hungary

Society and Economy, 2012, vol. 34, issue 1, 51-72

Abstract: In the paper, we construct a composite indicator to estimate the potential of four Central and Eastern European countries (the Czech Republic, Hungary, Poland and Slovakia) to benefit from productivity spillovers from foreign direct investment (FDI) in the manufacturing sector. Such transfers of technology are one of the main benefits of FDI for the host country, and should also be one of the main determinants of FDI incentives offered to investing multinationals by governments, but they are difficult to assess ex ante. For our composite index, we use six components to proxy the main channels and determinants of these spillovers. We have tried several weighting and aggregation methods, and we consider our results robust. According to the analysis of our results, between 2003 and 2007 all four countries were able to increase their potential to benefit from such spillovers, although there are large differences between them. The Czech Republic clearly has the most potential to benefit from productivity spillovers, while Poland has the least. The relative positions of Hungary and Slovakia depend to some extent on the exact weighting and aggregation method of the individual components of the index, but the differences are not large. These conclusions have important implications both the investment strategies of multinationals and government FDI policies.

Keywords: productivity spillovers; technology transfer; investment incentives; foreign direct investment; Central and Eastern Europe (search for similar items in EconPapers)
JEL-codes: F23 L24 (search for similar items in EconPapers)
Date: 2012
Note: The research was supported by the following grant: TÁMOP-4.2.1.B-09/1/KMR-2010-0005, co-financed by the European Social Fund.
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