Outsiders' Response to Europe 1992. Case of Austria

Christian Bellak

No 16, Department of Economics Working Paper Series from WU Vienna University of Economics and Business

Abstract: This paper deals with the response of outsider countries to the EC'92 single-market act. The theory developed by Hirsch, Almor (1992) is tested with Austrian data. Several hypotheses on the change in the geographical orientation of firms since 1987, in particular the increase of foreign direct investment (FOi) into EC in order to overcome likely barriers to entry after completion of EC'92 is confirmed. Uncertainty concerning the EES agreement and Austrian membership in EC lead to a sharp increase of Austrian FOi in relation to domestic investment. Yet, a substantial share of total FDI flow was accounted for by the only "true" Austrian multinational in the late 80ies. This is a state-owned company which does not represent the private sector which has been - with a few exceptions - less dynamic in FOi so far. The hypothesis concerning the knowledge-intensity of production, the type of competition (costrelated, quality-related) and firm integration was also tested but did not find strong support.

Date: 1992-12
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