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FDI Flows and Regional Development: Lessons for Transition Countries

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Entrepreneurship in Post-Communist Countries

Abstract

Foreign affiliates of multinational enterprises and FDI flows play an increasing role in regional economic development. As firms decide about the engagement in a particular location, public authorities try to influence the firm-location decision. If regional policies succeed to include multinational enterprises in their development strategy in the interest of both, the region has gained a powerful ally in regional economic development. Hence, public authorities choose the (right) firm by setting incentives such that regional and firm goals are aligned, whereas firms choose the (best) location by calculating the expected return among different regions. In this contribution, we outline a theoretical approach based on the idea that the location choice for foreign affiliates of MNEs is a two-sided matching problem between firms and regions. We show in the empirical analysis that the huge heteroscedasticity among regions allows different regional strategies to find a niche and to attract firms according to their profile.

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Notes

  1. 1.

    See http://ec.europa.eu/eurostat/statistics-explained/index.php/Regional_competitiveness_statistics

  2. 2.

    There is a wide range of data on FDI flows and activities of MNEs from different sources and aggregation levels. Regional data can be found in the Eurostat Structural Business Survey (SBS). At a country level, MNE data is provided by OECD databases, whereas the United Nations Conference on Trade and Development, World Bank, International Monetary Fund, and International Trade Center provide FDI data. Moreover, the AMADEUS database of the Bureau van Dijk offers regional FDI stocks, number of foreign-owned firms, sales, value added, and employment of MNEs and their affiliates. However, access and use of the AMADEUS database is restricted to subscriptions.

  3. 3.

    Tables 1 and 2 in the appendix provide specific information and descriptive statistics for the regions of the EU-28 countries and their country aggregates.

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Author information

Authors and Affiliations

  1. Faculty of International Business, Heilbronn University, Max-Planck-Straße 39, 74081, Heilbronn, Germany

    Kurt A. Hafner

  2. Institut für Volkswirtschaftslehre, Universität Graz, Universitätsstraße 15/F4, 8010, Graz, Austria

    Jörn Kleinert

Authors
  1. Kurt A. Hafner
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  2. Jörn Kleinert
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Corresponding author

Correspondence to Kurt A. Hafner .

Editor information

Editors and Affiliations

  1. Faculty of Economics, University of Banja Luka, Banja Luka, Bosnia and Herzegovina

    Jovo Ateljević

  2. The Institute of Economics, Zagreb, Croatia

    Jelena Budak

Appendix

Appendix

Table 1 Country aggregation (Annual data for 28 EU countries of 2011 and 2013)
Full size table
Table 2 Descriptive and correlation analysis (Annual data for 28 EU countries of 2011 and 2013)
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Hafner, K.A., Kleinert, J. (2018). FDI Flows and Regional Development: Lessons for Transition Countries. In: Ateljević, J., Budak, J. (eds) Entrepreneurship in Post-Communist Countries. Springer, Cham. https://doi.org/10.1007/978-3-319-75907-4_4

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