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Foreign Direct Investment in the Czech Republic: The Role of Origin Effects and Government Promotion Abroad

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Abstract

This paper examines country-of-origin effects accounting for the Czech Republic's accumulation of $60 billion in FDI during the years surrounding accession to the European Union. Careful attention is paid to CzechInvest's assertive marketing through offices abroad. Government promotion initially drew investment from firms in countries relatively less familiar with the Czech Republic, and while its importance is confirmed empirically, it remains inferior to agglomeration and trade flows, and is followed by EU membership. The inquiry yields substantial consistency across model specifications with variables that eclipse other conventional explanations of FDI including market factors, exchange rates, and geographical distance.

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Notes

  1. UNCTAD defines FDI as direct investment made to acquire lasting interest of at least 10% ownership in enterprises operating outside of the economy of the investor, and reports annual and cumulative national inflows at http://stats.unctad.org/FDI/.

  2. Poland's PAIiIZ, Hungary's ITDH, Russia's NAPI, for example; a complete list is available at http://www.waipa.org/members.htm.

  3. See, for example http://www.tax-consultants-international.com/.

  4. For example, Spain is the leading origin for 2005 only because of Telefonica's $4.8 billion investment. All other Spanish investment totals about $300 million.

  5. A collinearity matrix has been generated as is available from the author. In the interest of space, it has been omitted from this paper.

  6. The correlation between the two dependent variables (logFDI0005 and logFDI06) is 0.720, significant at the 0.01 level.

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Acknowledgements

The author thanks the editor and three anonymous reviewers for their helpful suggestions, and Bayar Tumennasan for his methodological assistance.

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Authors and Affiliations

  1. Global Studies Department, Bentley University, 175 Forest Street, Waltham, 02452, Massachusetts, USA

    Joel I Deichmann

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Appendix

Appendix

See Table A1.

Table a1 Countries in the data set
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Deichmann, J. Foreign Direct Investment in the Czech Republic: The Role of Origin Effects and Government Promotion Abroad. Comp Econ Stud 52, 249–272 (2010). https://doi.org/10.1057/ces.2010.1

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