Abstract
A key issue, which emerged in the context of the theoretical framework in Chapter 2, concerns the institutional aspect of FDI competition between governments, and the need to analyze locational competition not just within the neoclassical framework of the “two-dimensional range of price theory, which examines only price and quantity”,374 but also to consider investment promotion as another area in which governments compete. To follow-up on this point, the underlying institutional governance structure of the competitive process, which involves national or local governments and Investment Promotion Agencies as their agents, will be examined.
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References
NORTH (1986), p. 230.
See MORISSET/ ANDREWS-JOHNSON (2004), p. 7.
See KASPER/ STREIT (1998), p. 67.
See NORTH (1990), p. 111.
See also MUDAMBI (1999), p. 69.
See STOPFORD/ TURNER (1985), cited by FRASER (1999), p. 4, for details on the composition of FDI in Britain during that period.
This also included the appointment of a private sector Chief Executive, Andrew Fraser, who started his work at IBB in 1994.
The UK’s FDI performance dramatically declined in 2002 (down 60 percent), and is said to have declined further in 2003 (down almost 50 percent). See UNCTAD (2003); OECD (2004).
See FDI data in UNCTAD (2003).
See SIEBERT (2002), p. 8.
See RAINES/ BROWN (1999), p. 21. Only recently has Germany received its fair share of M&A related FDI activities, with the Mannesman/ Vodafone merger marking a peak in 2000.
See FDI data in UNCTAD (2003). Inward FDI exceeded outward FDI in 2000 and 2002.
Although foreign investment played a role in the 1991–1994 privatization program administered by the Treuhand, contrary to popular belief, most of the acquisitions were undertaken by West-German companies, while foreign investment accounted only for ten percent (see UNCTAD, 2003, p. 42).
See IIC (2004).
See FAZ (2003), p. 11.
See FDI data in UNCTAD (2003), p. 249.
FAZ (2003), p. 11.
DW (2003).
See MORISSET/ ANDREWS-JOHNSON (2004) for details on issues pertaining to the effectiveness of promotion agencies in attracting foreign direct investment.
See UNCTAD (2002), p. 42.
Investors tend to be attracted to clusters due to availability of specialized labor, supplier, infrastructure and other resources, despite the higher costs they sometimes incur (see also Katseli’s “thick-market-externalities” argument in 2.3.3). Countries benefit in terms of higher quantity as well as, most importantly, higher quality of FDI flows (see KETELS, 2004).
See FAZ (2003), p. 11.
See UNCTAD (2003), p. 252.
See UNCTAD (2003), p. 61.
See UNCTAD (2003a), p. 17. Subsequently the share of FDI stock as percentage of GDP went up from 14.1 percent in 1995 to 54.8 percent in 2002.
See UNCTAD (2003), p. 61.
See UNCTAD (2003), p. 69.
The law governing the national incentive scheme is the Investment Incentive Act (72/2000 Coll.), which is officially called the “Act on Investment Incentives and Amendment of Certain Acts, as amended by Act No. 453/2001”. Subsequent amendments came into force on May 1, 2004 (see MALLYA/ KUKULKA/ JENSEN, 2004, p. 122; and CzechInvest Website).
See MALLYA/ KUKULKA/ JENSEN (2004), p. 121. In particular, the May 2004 amendment reduced the minimum level of investment as well as unified the tax relief provided to both new and established investors.
See MALLYA/ KUKULKA/ JENSEN (2004), p. 122; CzechInvest Website.
The net effect of the national incentive scheme appears mixed. MALLYA/ KUKULKA/ JENSEN (2004) conclude that only a small number of investors in the manufacturing sector (10 percent) were specifically attracted by incentives offered. Moreover, the most dramatic increase in FDI since 1998 occurred in the service sector, which is only partially covered by incentives. SEDMIHRADSKY/ KLAZAR (2002) suggest that the introduction of incentives in the Czech Republic diverted FDI flows from Hungary but had no effect on investment flows into Poland.
See MALLYA/ KUKULKA/ JENSEN (2002), p. 142.
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(2006). Governance Models for Investment Promotion in Europe. In: Locational Tournaments in the Context of the EU Competitive Environment. DUV. https://doi.org/10.1007/978-3-8350-9109-2_9
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