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This paper investigates the determinants of European Union FDI in the CEECs at sectoral level. The aim is to understand whether and to what extent FDI undertaken in different sectors reacts to the characteristics of the host countries. The analysis is based on a dataset created specifically for this purpose. It concentrates on the manufacturing sectors, classified according to the Pavitt taxonomy. Firstly, data summarizing the recent trend of FDI in the CEECs is presented and then empirical evidence given to account for differences between sectors. The estimated model is a generalization of a three‐way fixed effect model incorporating 'classic' variables, such as labour costs as well as country‐specific variables, i.e., the stage reached in the transition process. The results confirm the presence of heterogeneity at sector level.

In this paper we argue that informal institutions, or more generally, what is called social capital, can act as one of the mediating factors determining the size and the direction of foreign direct investment-induced spillovers on growth and productivity at regional level. The idea is that when a foreign firm sets up a new production plant in a location, the nature and the quality of its relationships with local workers and firms are affected by the endowment of social capital of that location. A 'wrong' social capital may make these relationships difficult, thus limiting the capacity of the host economy to convert foreign direct investment-induced spillovers into local competencies conducive to growth. We operationalized informal institutions in terms of generalized trust, associational activity, and cultural closeness and we found that spillover effects do not arise: (1) when generalized trust is too 'self-referential', (2) the level of associational activities is low, and (3) cultural closeness towards foreigners and external culture dominate the society. We also found that foreign presence is not universally beneficial, since positive spillovers are associated with EU-originating foreign firms and foreign direct investment in services only. These results have policy implications for the EU regions. In order to maximize the returns from foreign direct investment, the issue of the origin of foreign investors as well as the sectoral composition of foreign direct investment inflows should be carefully considered. Furthermore, investments in education may help regions to benefit more from the foreign presence because human capital and social capital are likely to be complementary.

This paper deals with the performance of multinational enterprises (MNEs) during the recent financial crisis in the EU regions. According to the existing literature both foreign affiliates and local territories may benefit one from each other. There is a huge literature suggesting that FDI is sensitive to transparent and open systems that may ensure a good access to local resources, such as human capital, knowledge and technology, as well as regions with enough capacity to 'absorb' the new technology, know-how and management practices brought into their territories by MNEs may enjoy faster economic growth. This implies that MNEs and regions hosting their foreign plants are interlinked; therefore, the (mis)fortunes of one may condition the performance of the other. The economic crisis that affected and still affects most of European regions both within and across countries has further emphasised the importance of this issue. Do regions hosting foreign production plants show a better resilience to crisis? Do MNEs survive better than indigenous firms during this period? And if yes, which characteristics allowed MNEs to better react to the crisis than other firms? In addressing these questions, we first examine if foreign ownership, and the associated involvement in global value chains, was a factor influencing firms' performance and, if so, through which channels. Then, the identified channels are shown to be also important to explain differences across firms in the response to the crisis. To the best of our knowledge, this is the first article addressing systematically the implications of the recent crisis for firms' performance and drawing from it insights about the EU regions resilience to global shocks. Our analyses rely on a comprehensive firm-level dataset including all firms active in the EU before the economic crisis (2006). Both indigenous and foreign firms are considered and several firm's characteristics, i.e. size and experience, the market focus, and the ownership structure, have been accounted for in order to analyse the probability to survive to the crisis of domestic and foreign firms. Micro-data on firms is derived from the AMADEUS database of firm financial accounts which is provided by the Bureau Van Dijk. This paper offers several contributions to the existing debate on the importance of foreign firms for the performance of local economies. First all, it sheds light on the role of MNEs in EU regions resilience to the crisis. Secondly, it helps in understanding whether multinational firms acted as a stabilizer or a propagator of the crisis across EU regions. Finally, identifying firms - both local and foreign - that may improve regions' resilience to the crisis may help design more effective and better targeted policies for enhancing local development and attract foreign firms that suit better within the local context.

In the last years, and particularly since the publication of the famous Barca Report (Barca, 2009), the European Union (EU) is starting to acknowledge the importance of spatially targeted regional policies and to understand how crucial a territorial approach can be in order to achieve desirable social, economic and environmental outcomes. Indeed the increasing complexity in the path to regional growth and development is fostered by globalization and the creation of large integrated areas such as the European Union, where regions need to leverage their territorial capital to compete effectively. In this context we analyse the impact of FDI on growth and development of European regions, discussing the role of different components of territorial capital in determining the intensity and the direction of such an impact. In doing so we start from the assessment of the impact that various types of FDI can have according to the characteristics of the country they come from (Industrialized vs. emerging countries; European vs. non-European countries) and their sector's affiliation (i.e. low and high tech manufacturing sectors; business services vs. financial services, etc.). Then we inspect the possibility that such an impact may vary with the endowments of different type of territorial capital. In particular, the paper aims at answering to the following research questions: do different levels of agglomeration economies determine different additional FDI induced growth rates? How social capital influences the impact of FDI on the growth of a region? Does relational capital matter in the FDI-growth relationship? In order to answer these research questions, we analyse empirically the impact of different measures of FDI density on regional economic performance, measured as real GVA growth rate, exploiting FDIRegio database and Eurostat data. In order to mitigate possible endogeneity problems and non linearities in the relationship, we use different matching techniques and include various regional controls, such as human capital endowments, past growth rates and agglomeration trajectories, as well as demand and cost factors. Furthermore, in order to identify the territorial capital role in fostering the FDI-growth relationship, we allow such relationship to vary across different types of regions, grouped according to their economic specialization and social capital endowment. The latter is identified through a PCA analysis based on the results of the European Values Study, from the ZACAT - GESIS database

AbstractUsing an unbalanced panel of firm‐level data in Bulgaria, Poland and Romania, we examine the impact of foreign firms on domestic firms' productivity. In particular, we try to answer the following research questions: (1) Are there any spillover effects of foreign direct investments (FDI), and if so, are they positive or negative? (2) Are spillover effects more likely to occur within or across sectors? (3) Are the existence, the direction and the magnitude of spillovers conditioned by sector and firm‐specific characteristics? Our findings show that FDI spillovers exist both within and across sectors. The former arise when foreign firms operate in labour‐intensive sectors, while the latter occur when foreign firms operate in high‐tech sectors. Moreover, we find that domestic firm size conditions the exploitation of FDI spillovers even after controlling for absorptive capacity. We also detect a great deal of heterogeneity across countries consistent with the technology gap hypothesis.

We estimate an augmented gravity model to analyse the effects of FDI into China originating in OECD countries on FDI into EU and other countries over the period 1990-2004. Our results suggest that on average, ceteris paribus, over the analysed period, FDI inflows into China have been complementary to FDI inflows into EU15 countries but they have substituted FDI into the new EU countries in Central and Eastern Europe. In particular, small economies such as Bulgaria and the Baltic countries have been affected negatively by the surge in the FDI into China. This FDI diversion appears in the case of efficiency-seeking FDI.

Many governments in Central and Eastern European Countries (CEECs) have offered significant incentives in order to attract foreign investments, motivated by expectations on possible spillover benefits. FDI is usually perceived as a vehicle for transferring technology not only across national boundaries but also between firms, i.e. between foreign and domestic firms. When a foreign firm enters a new market, it generates different reactions from domestic firms. Additional competition pushes for efficiency improvements, which become necessary if firms want to keep their market shares. Domestic firms may learn from foreign companies about new products, production techniques and organization skills, thus increasing their performance. This transfer of benefits may occur either voluntarily, through input output linkages between domestic and foreign firms, or involuntarily through competition, imitation and training. The final result, however, is the same: domestic firms become more productive and efficient, thus fostering local industrial development, as suggested by several economists, from Hirschman (1954) to Markusen and Venables (1999). Despite this long theoretical tradition, there is little conclusive evidence supporting this claim. This paper focuses on the role played by multinational enterprises in fostering the economic development of the hosting regions in Central and Eastern European Countries (CEECs) by testing whether and to what extent technology transfer between domestic and foreign firms does occur. We distinguish not only between horizontal and vertical effects, but also, within the latter, between contacts between domestic suppliers of intermediate inputs and their multinational customers, and contacts between foreign suppliers of intermediates inputs to their domestic clients. The analysis is based on an unbalance panel of about 30,000 domestic firms and about 7,000 foreign firms operating in the manufacturing sector in Bulgaria, Czech R., Hungary, Poland and Romania. The years covered are 1993 through 2002. From a methodological point of view, we adopt the semiparametric estimation method suggested by Olley and Pakes (1996) to account for endogeneity of input demand, and test for the presence of several specific effects, such as country, region, time and sector effects.