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Trade and growth nexus in Zimbabwe: quantifying the economic implications of joining the Tripartite Free Trade Area: paper presented at the Midlands State University and University of Venda conference on Economic Integration, Entrepreneurship and Sustainable Development held at Midlands State Uni...more
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ABSTRACT Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s,... more
ABSTRACT Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the country’s privatization process. Their outward investment started to grow fast only a decade later, but has weathered the global crisis relatively well. The majority of these multinationals are based on natural resource extraction, heavy industries (metallurgy) and selected services such as telecommunications and banking. Given these characteristics, it is not surprising that they opt for acquisitions as a preferred mode of market entry in their quest of fast conquest of markets abroad. This chapter analyses the main features of the foreign acquisitions of Russian firms such as the overall drive of Russian firms to control the value chain of their product, be it oil and gas, metals, food, banking services or telecommunications. It puts the analysis into the context of the full Russian market for acquisitions (dominated by local deals but also containing inward and outward investment) and of total foreign direct investment (FDI). The chapter also examines the main characteristics of the mega-deals carried out by Russian firms, such as their use to leapfrog into the global scene without passing the regional route. The concluding part attempts to answer the question if the recent speed of foreign acquisitions is sustainable under the new conditions of the global crisis.
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Obituary of John H. Dunning in Hungarian
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FDI and economic transformation in Sub-saharan Africa: paper prepared for the Midlands State University 1st International Research Conference: Driving Socio-Economic Development through Value Addition and Sustainable use of Resources held at Elephant Hills Resort, Victoria Falls, Zimbabwe 14-16 J...more
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SUMMARY Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and... more
SUMMARY Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and unregistered in the balance of payments, or misregistered under other items. Since 2003, their recording has improved. However, the question remains: how can a lower-middle income country become a net capital exporter? It is supposed to be the combined result of economic and political factors ...
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Over a historically brief period (a decade and a half), Russia has become a major outward-investing country on the global stage. According to data from the United Nations Conference on Trade and Development (UNCTAD), Russia’s registered... more
Over a historically brief period (a decade and a half), Russia has become a major outward-investing country on the global stage. According to data from the United Nations Conference on Trade and Development (UNCTAD), Russia’s registered outward foreign direct investment (OFDI) stock increased from US$2 billion in 1993, to US$255 billion in 2007 (UNCTAD 2008), making it the fifteenth most important source economy of investments worldwide, and the second largest among emerging markets, behind Hong Kong (China) only and ahead of Brazil, China, India, and South Africa (figure 8.1). However, the onset of a major financial crisis in the second half of 2008, which affected Russia’s economy significantly, raises questions about the immediate future, as well as the long-term sustainability, of those large outward investments.
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During the transition to market economy, inward foreign direct investment was a major source of growth and structural transformation in the 11 Central and Eastern European member states of the European Union. In these countries, the onset... more
During the transition to market economy, inward foreign direct investment was a major source of growth and structural transformation in the 11 Central and Eastern European member states of the European Union. In these countries, the onset of the Great Recession coincided with the gradual exhaustion of competitiveness based on cheap semi-skilled labour. In the aftermath of the crisis, these countries have to find new ways of leveraging their skills base, if they wish to defend their place in the international division of labour. Difficulties in attracting FDI are reflected in the fact that the share of the CEE countries in world FDI flows and stocks has stopped increasing. The chapter analyses past features of FDI in the region in order to draw conclusions on potential future performance. It also analyses the policy responses of individual countries to the crisis and the new conditions of attracting FDI.
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Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the... more
Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the need for economic theory to explain their activities (for example [Dunning 1977] and [Vernon, 1971]). In Hungary, Andras Blaho ([1980]) was among the first ones to note their importance in the world economy in general and in the organization of international production in particular. He built his observations in part on the findings of other Hungarian economists observing the MNE phenomenon since the early 1960s (for example Mihaly Simai [1962]). It is therefore no coincidence that Hungary became, after the political change of 1989–1990 and its early on opening to FDI (see for example [Sass 2004]), one of the main regional centres of research on FDI.
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Abstract: 2008 was marked by major changes in the world economy: the international integration based on money and capital markets fell into a deep crisis. This article examines how foreign direct investment-together with international... more
Abstract: 2008 was marked by major changes in the world economy: the international integration based on money and capital markets fell into a deep crisis. This article examines how foreign direct investment-together with international trade-can replace those money and capital markets in the role of integrator of the world economy. It does not aim to provide an all-encompassing overview of future developments; nevertheless it analyses in detail to what degree foreign direct investment meets the requirements of being a stable ...
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Abstract: The global number of regulatory changes less favourable to foreign direct investment increased significantly in 2004 and 2005. But before declaring an end to the era of liberalism and the advent of a new era of protectionism, or... more
Abstract: The global number of regulatory changes less favourable to foreign direct investment increased significantly in 2004 and 2005. But before declaring an end to the era of liberalism and the advent of a new era of protectionism, or perhaps of strategic interventionism, one should add a word of caution here. The large majority of regulatory changes are still more favourable to investors. This dualism of current policies can be explained on the basis of the obsolescing bargain theory, according to which investors ...
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... It also used to have a distribution agreement with South African De Beers' affiliate, The Diamond ... However, they still have a long way to go before engaging in deep outward FDI. ... monopolistic behaviour in... more
... It also used to have a distribution agreement with South African De Beers' affiliate, The Diamond ... However, they still have a long way to go before engaging in deep outward FDI. ... monopolistic behaviour in the home base is an important source of internalization advantages for ...
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This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is different from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and... more
This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is different from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and tax considerations. The development impact of indirect FDI is not necessarily negative; however it varies by the key types of indirect FDI (delegation of power to regional headquarters, nearshoring, concealed investment, and round tripping). It also depends on how the project money is transhipped: through an affiliate abroad, or through a special purpose entity. Government polices may influence largely the extent and development impact of indirect FDI, especially through tax policies. The phenomenon deserves more attention in the future, as currently indirect FDI is an under-researched topic.
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This paper explores the main features of outward foreign direct investment by Russian transnational corporations–referred to as 'eagle multinationals' in the literature–and some of the... more
This paper explores the main features of outward foreign direct investment by Russian transnational corporations–referred to as 'eagle multinationals' in the literature–and some of the implications of their recent rise to global prominence (since the 1990s) for the paradigms of international investment. Surprisingly, lower middle-income Russia is already a net capital exporter, and some of its firms, to mention Gazprom, Lukoil, Mechel, Norilsk Nickel and Severstal, for example, have already leapfrogged to a global status. The paper aims also ...
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Abstract In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region's reintegration into the world economy as trade liberalisation used to be in the... more
Abstract In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region's reintegration into the world economy as trade liberalisation used to be in the early 1990s or inward foreign direct investment is currently. In the terminology of the investment–development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer status of the ...
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Russia's full-fledged war on Ukraine, which started in February 2022, added major uncertainties to foreign direct investment (FDI) to and from Russia and affected it negatively in the short, medium, and long run. The degree of the hit... more
Russia's full-fledged war on Ukraine, which started in February 2022, added major uncertainties to foreign direct investment (FDI) to and from Russia and affected it negatively in the short, medium, and long run. The degree of the hit would depend on the exact contents of sanctions and countersanctions in constant development. However, the severe consequences of some of them were already visible early on, adding to the financial strain caused by the war. FDI to and from Russia fell drastically in 2022 and, depending on the length and depth of the conflict, would remain sluggish in the subsequent years if no exit strategy is found to stop the conflict and its eventual escalation. This article concludes that the fall in FDI would, in the end, hurt the economic capacities of Russia, already affected by a previous round of sanctions imposed in 2014. If it works, decoupling the Russian economy from FDI partners by applying sanctions would be effective only partially and at a relatively high cost. That, in turn, could thwart the very economic fundamentals of the war effort.
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In the enlarged European Union (EU) with 25 members, the free movement of capital, coupled with the free movement of goods and services should be a major direct attraction for both intra-EU and external foreign direct investment (FDI)... more
In the enlarged European Union (EU) with 25 members, the free movement of capital, coupled with the free movement of goods and services should be a major direct attraction for both intra-EU and external foreign direct investment (FDI) inflows. EU membership does not, however, lead to a linear increase in FDI inflows as many analysts suggest (ECE, 2001). With EU accession, the structure of FDI may change substantially (Hunya, 2000; Dyker, 2001). Activities based on the existence of closed domestic markets (eg food and ...
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Abstract The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from... more
Abstract The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from labor productivity—not from lower taxes and large transfers from the European Union budget, as is sometimes claimed. Compared to opportunities, the foreign direct investment inflows of the new members have been so far small and slow-growing. Part of this performance may be due to the wrapping ...
Research Interests: Economics, International Economics, International Trade, Foreign Direct Investment, European Union, and 11 moreCompetitive advantage, Social Science Research Network, Business and Management, Iron, Relocation, Blame, Protectionism, Enlargement, Labor Productivity, Tax Competition, and Investment Creation/diversion
Purpose–The purpose of this paper is to examine the potential impact of the 2008 economic crisis on foreign direct investment (FDI), especially in the new member states of the European Union. Particular attention is paid to the activities... more
Purpose–The purpose of this paper is to examine the potential impact of the 2008 economic crisis on foreign direct investment (FDI), especially in the new member states of the European Union. Particular attention is paid to the activities of subsidiaries of multinational enterprises (MNE), which can follow different scenarios as a response to the crisis, including a reorganisation of their production systems, and a reduction or closure of activities. Design/methodology/approach–The analysis is grounded on various streams of literature, ...
Research Interests: Business, Marketing, Economics, Foreign Direct Investment, European Union, and 10 moreEmerging Markets, Central and Eastern Europe, Business and Management, Global Crisis, Foreign Direct Investment ( FDI ), Subsidiary, Euroepan Union Integration, Emerging, MULTINATIONAL CORPORATION, and Member States
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Abstract: In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region's reintegration into the world economy, especially when compared to trade liberalization... more
Abstract: In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region's reintegration into the world economy, especially when compared to trade liberalization in the early 1990s or inward foreign direct investment in the late 1990s. In the terminology of the investment-development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer ...
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Research Interests: Business, Management, Marketing, Economics, Natural Resources, and 13 moreEmerging Economies, Foreign Direct Investment, China, Value Chain, Developing Country, Business and Management, TNC, Russian Federation, Outward FDI, Transnational Corporations, Natural Resource, Downstream Activities, and Destinations
ABSTRACT Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and... more
ABSTRACT Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and unregistered in the balance of payments, or misregistered under other items. Since 2003, their recording has improved. However, the question remains: how can a lower-middle income country become a net capital exporter? It is supposed to be the combined result of economic and political factors such as the economic and business environment, still deemed to be difficult. The fact that the ‘oligarchy’ created under the presidency of Boris Yeltsin (1991-1999) continues to control large parts of the privatized natural resources of the country also stimulated capital exporting behavior. With the political changes currently taking place, only a limited increase in the influence of the State is expected to happen. Moreover, the strategic interest of Russian firms to control their vertical value chains through outward FDI is expected to remain in the longer term.
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ABSTRACT
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This article explores the main features of outward foreign direct investment by Russian corporations and some of the implications of their recent rise to global prominence for the theories of international investment. Surprisingly, lower... more
This article explores the main features of outward foreign direct investment by Russian corporations and some of the implications of their recent rise to global prominence for the theories of international investment. Surprisingly, lower middle-income Russia is a net capital exporter, and some of its firms, such as Gazprom, Lukoil, Norilsk Nickel, and Severstal, have already leapfrogged to a global status. This article also aims to identify issues for further analysis, such as the growing role of the state in controlling natural ...
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... T able 2. Privatization-related FDI inflows in selected Central and Eastern European countries ... Privatization is understood as one of the basic pillars of transformation into a market economy (World Bank, 1996), together with... more
... T able 2. Privatization-related FDI inflows in selected Central and Eastern European countries ... Privatization is understood as one of the basic pillars of transformation into a market economy (World Bank, 1996), together with liberalization, stabilization and institutional reforms ...
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This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The... more
This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The review categorizes the literature of the 2010s and early 2020s into three main threads: one focusing on the developmental aspects of the phenomenon, another one with a fiscal–legal–regulatory approach, and a third one raising questions about the quality and reliability of FDI data or special aspects such as the relationship between sanctions and outward FDI. This review also highlights improvements in FDI data collection on ultimate investors over the past decade, based on the example of three Visegrad countries. In this respect, important progress has been achieved. Prospects for future research on indirect FDI are quite promising, especially via interdisciplinary approaches and aiming at improving the coverage and the quality of relevant data. Ultimately, the quality of the evaluation of indirect FDI hinges, more than anything, on the availability of empirical evidence.
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This article reviews the main characteristics of both inward and outward foreign direct investment (FDI) in the Baltic Sea region. Among other questions, it explores the extent to which intra-regional flows have gained in importance over... more
This article reviews the main characteristics of both inward and outward foreign direct investment (FDI) in the Baltic Sea region. Among other questions, it explores the extent to which intra-regional flows have gained in importance over recent years. It highlights that both inflows and outflows have failed to recover quickly after the Great Recession of 2007–2009, due to problems in the Eurozone and the crisis of the Russian economy. Nevertheless, the Baltic Sea region remains a group that relies much on inward and outward FDI in economic development. It is also shown that for some of the economies, intra-grouping investment ties are important. These ties are particularly close between some neighbours and with large economies, especially Germany and Sweden.
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Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both... more
Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both foreign market entry strategies and operation methods of Russian companies are discussed. The chapter begins with a brief overview of relevant literature, followed by an overall picture of foreign acquisitions carried out by Russian firms. Next, selected cases of foreign acquisitions are analysed, aiming at finding out the main motivations and main competitive advantages of the firms involved in those transactions. The subsequent section consists of snapshots of MNEs in Russian oil and gas and metallurgy industries, and in non-resource-based industries. It is followed by a short survey of failures and half-failures in the foreign acquisitions of Russian firms. At the end of the chapter we conclude by discussing how our findings can advance new research on Russian MNEs and predict the future of developing their competitive advantage through M&A.
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ABSTRACT This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017,... more
ABSTRACT This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017, although at a slow speed. Going beyond the values forecast by the model, we can also expect a relatively slow but steady growth in the late 2010s. However,modeling and forecasting cannot fully take into consideration one-off shocks, which are still not excluded given the vulnerabilities of the world economy.The main reason for limited potential growth of foreign direct investment and its vulnerability is the relative openness of the Baltic Sea Region to external shocks. However, on balance, the growth of foreign direct investment in the region can be still faster than in other parts of the world, thanks to the solid macroeconomic bases of the region's economies.
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During the transition to market economy, inward foreign direct investment was a major source of growth and structural transformation in the 11 Central and Eastern European member states of the European Union. In these countries, the onset... more
During the transition to market economy, inward foreign direct investment was a major source of growth and structural transformation in the 11 Central and Eastern European member states of the European Union. In these countries, the onset of the Great Recession coincided with the gradual exhaustion of competitiveness based on cheap semi-skilled labour. In the aftermath of the crisis, these countries have to find new ways of leveraging their skills base, if they wish to defend their place in the international division of labour. Difficulties in attracting FDI are reflected in the fact that the share of the CEE countries in world FDI flows and stocks has stopped increasing. The chapter analyses past features of FDI in the region in order to draw conclusions on potential future performance. It also analyses the policy responses of individual countries to the crisis and the new conditions of attracting FDI.
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This article analyses direct investment patterns by Russian firms in the four Visegrád countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, it relies on case studies to... more
This article analyses direct investment patterns by Russian firms in the four Visegrád countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, it relies on case studies to present the profile of the most important Russian investors in each host country. In the Visegrád countries, market-, and to a lesser extent, resource-seeking investment by state-owned firms in the hydrocarbons, steel and nuclear energy industries dominate. Some innovative private Russian companies, with features similar to developed-country multinationals can also be identified. Extant investment theories, with the exception of the eclectic paradigm, fall short of explaining Russian investment.
Research Interests: Business, Central Europe, Russian Foreign Policy, Multinational Enterprises, Foreign Direct Investment, and 11 morePoland, Multinational Corporations, Czech Republic, Russia, Central and Eastern Europe, Social Science Research Network, Hungary, Foreign Direct Investment ( FDI ), Visegrad Group, Slovakia, and Visegrad cooperation
Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the... more
Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the country’s privatization process. Their outward investment started to grow fast only a decade later, but has weathered the global crisis relatively well. The majority of these multinationals are based on natural resource extraction, heavy industries (metallurgy) and selected services such as telecommunications and banking. Given these characteristics, it is not surprising that they opt for acquisitions as a preferred mode of market entry in their quest of fast conquest of markets abroad. This chapter analyses the main features of the foreign acquisitions of Russian firms such as the overall drive of Russian firms to control the value chain of their product, be it oil and gas, metals, food, banking services or telecommunications. It puts the analysis int...
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This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The... more
This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The review categorizes the literature of the 2010s and early 2020s into three main threads: one focusing on the developmental aspects of the phenomenon, another one with a fiscal–legal–regulatory approach, and a third one raising questions about the quality and reliability of FDI data or special aspects such as the relationship between sanctions and outward FDI. This review also highlights improvements in FDI data collection on ultimate investors over the past decade, based on the example of three Visegrad countries. In this respect, important progress has been achieved. Prospects for future research on indirect FDI are quite promising, especially via interdisciplinary approaches and aiming at improving the coverage and the quality of relevant data. Ultimately, the quality of the evaluation of indirect FDI hinges, more than anything, on the availability of empirical evidence.
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This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The... more
This review presents some lessons learned about indirect foreign direct investment (FDI), mostly over the past decade. Indirect FDI denotes investment projects, in which the ultimate owner is different from the immediate investor. The review categorizes the literature of the 2010s and early 2020s into three main threads: one focusing on the developmental aspects of the phenomenon, another one with a fiscal–legal–regulatory approach, and a third one raising questions about the quality and reliability of FDI data or special aspects such as the relationship between sanctions and outward FDI. This review also highlights improvements in FDI data collection on ultimate investors over the past decade, based on the example of three Visegrad countries. In this respect, important progress has been achieved. Prospects for future research on indirect FDI are quite promising, especially via interdisciplinary approaches and aiming at improving the coverage and the quality of relevant data. Ultimately, the quality of the evaluation of indirect FDI hinges, more than anything, on the availability of empirical evidence.
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A Köz-Gazdaság interjút kért Kalotay Kálmántól, az UNCTAD korábbi vezető közgazdászától, aki jelenleg az ELKH KRTK Világgazdasági Intézetének kutatója. Kalotay Kálmán 1983 és 1990 között az akkori Marx Károly Budapesti... more
A Köz-Gazdaság interjút kért Kalotay Kálmántól, az UNCTAD korábbi vezető közgazdászától, aki jelenleg az ELKH KRTK Világgazdasági Intézetének kutatója. Kalotay Kálmán 1983 és 1990 között az akkori Marx Károly Budapesti Közgazdaságtudományi Egyetem Világgazdasági Tanszékének volt ösztöndíjasa, adjunktusa. 1990 és 1996 között az Egyesült Nemzetek Kereskedelmi és Fejlesztési Konferenciája (UNCTAD) Fejlődő Országok Közötti Gazdasági Együttműködési Főosztályának volt (ECDC) gazdasági ügyekkel foglalkozó segédmunkatársa, majd 1996-tól egészen 2021-ig az Egyesült Nemzetek Kereskedelmi és Fejlesztési Konferenciája (UNCTAD) Befektetési és Vállalkozásfejlesztési Főosztályának (DIAE) gazdasági ügyekkel foglalkozó munkatársa. Tagja volt a World Investment Reportokat és az Investment Policy Review-kat készítő csoportnak. Az előbbinek 1996–2010 és 2016–2021 között, az utóbbinak 2010–2016 között. Széles körű oktatási tapasztalattal rendelkezik, tanított Torinóban, Finnországban és Mexikóban is.
This ebook contains two succinct essays on the future of foreign direct investment (FDI), and one on the future of Russo–Hungarian investment links. In the first essay István Magas links the future of FDI to three major forces: changes in... more
This ebook contains two succinct essays on the future of foreign direct investment (FDI), and one on the future of Russo–Hungarian investment links. In the first essay István Magas links the future of FDI to three major forces: changes in climate, in demography, and in human behaviour. He analyses various dimensions of that future, including environmental, geopolitical and financial problems. In the second essay Predrag Bjelić and Radovan Kastratović focus on both global and regional issues. On the global scene, they deal with the repercussions of the malfunctions of the multilateral system and the need to renew theories of FDI. At the regional level, they consider the future of FDI in the CEFTA 2006 region, which depends on the interaction between policies aimed at deepening intra-group cooperation and joining the European Union (EU). The third essay, by Kálmán Kalotay, attempts to predict the consequences of the Russo–Ukrainian war for Russo–Hungarian investment links. Business operations will be particularly difficult for Hungarian firms operating in Russia, which have to comply with the EU sanctions in an environment full of logistical and supply problems. The volume also contains an introduction by Kálmán Kalotay explaining why this book was born – to mark his retirement from the United Nations in September 2021 – and how he sees the upcoming years in light of his past personal experience. The ebook also includes the list of the words that authors were requested not to use due to their overdoing in other studies.
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Obituary of John H. Dunning in Hungarian
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FDI and economic transformation in Sub-saharan Africa: paper prepared for the Midlands State University 1st International Research Conference: Driving Socio-Economic Development through Value Addition and Sustainable use of Resources held at Elephant Hills Resort, Victoria Falls, Zimbabwe 14-16 J...more
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A Hungarian language study on bilateral Russian-Hungarian investment links
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This report analyses the dynamics and main features of Chinese investment, especially foreign direct investment (FDI), in the Baltic Sea region, as well as the policy challenges that such investment raises in the early 2020s. It reviews... more
This report analyses the dynamics and main features of Chinese investment, especially foreign direct investment (FDI), in the Baltic Sea region, as well as the policy challenges that such investment raises in the early 2020s. It reviews the main demographic, economic, institutional and geopolitical factors shaping Chinese investment in the region. The Chinese approach towards such investment is far from being unified since Chinese firms follow different motives and strategies when entering different countries of the region. As for overall FDI trends in the region as a whole, flows are rather volatile and, though there has been an increase of flows since 2018, China is not (yet) a major source of FDI for the Baltic Sea region, and these countries, perhaps with the exception of Germany, are not key targets for Chinese investment. As for the importance of China and its investment, Russia has become the country most relying on it. The report also looks at Chinese policies promoting investment to the region and the response of the countries in the Baltic Sea region both in terms of attracting and screening such FDI. The report notes the increasingly close strategic investment ties of Russia with China, which have been further strengthened since the onset of the war in Ukraine.
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The war in Ukraine started in February 2022 adds major uncertainties to foreign direct investment (FDI) to and from the Russian Federation and affects it negatively in the short, medium and long run. The degree of the hit will depend on... more
The war in Ukraine started in February 2022 adds major uncertainties to foreign direct investment (FDI) to and from the Russian Federation and affects it negatively in the short, medium and long run. The degree of the hit will depend on the exact contents of sanctions and counter-sanctions, not fully known yet. However, the severe consequences of some of them are already visible, adding to the financial strain caused by the war. FDI to and from Russia is expected to fall drastically in 2022 and, depending on the length and depth of the conflict, in the subsequent years if no exit strategy is developed fast to stop the conflict and its eventual escalation. This study concludes that the fall in FDI will at the end hurt the economic capacities of the Russian Federation already affected by a previous round of sanctions imposed in 2014. Decoupling of the Russian economy from FDI partners works, if it works, only partially, and at a relatively high cost. That in turn could thwart the very economic fundamentals of the war effort.
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"间接"FDI — 一种立即投资者不同于最终所有者的投资方式 — — 在公司战略和财务管理中发挥越来越重要的作用。作者分析了各种不同的形式,探索了其对发展的影响,并且建议如何尽量减少这种投资的潜在负面影响。
This article reviews the main characteristics of both inward and outward foreign direct investment (FDI) in the Baltic Sea region. Among other questions, it explores the extent to which intra-regional flows have gained in importance over... more
This article reviews the main characteristics of both inward and outward foreign direct investment (FDI) in the Baltic Sea region. Among other questions, it explores the extent to which intra-regional flows have gained in importance over recent years. It highlights that both inflows and outflows have failed to recover quickly after the Great Recession of 2007–2009, due to problems in the Eurozone and the crisis of the Russian economy. Nevertheless, the Baltic Sea region remains a group that relies much on inward and outward FDI in economic development. It is also shown that for some of the economies, intra-grouping investment ties are important. These ties are particularly close between some neighbours and with large economies, especially Germany and Sweden.
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The article has identified the right subnational interpretation of the principle of national treatment (NT) as a cornerstone determining the policy flexibility of subnational authorities. The purpose is to analyse measures of national and... more
The article has identified the right subnational interpretation of the principle of national treatment (NT) as a cornerstone determining the policy flexibility of subnational authorities. The purpose is to analyse measures of national and subnational authorities affecting the application of the principle of NT vis-à-vis the foreign investor, which allows to recommend certain approaches to investment policy making at the subnational level. The following issues are discussed in the article: concepts of foreign investors and foreign investment in the Russian Federation; NT in bilateral investment agreements; NT of investment in the context of the WTO agreements; a framework for the description of NT at the subnational level; classification of exceptions from NT; exceptions from NT according to GATS obligations; NT at the subnational level. In the Russian Federation the foreign investor has full legal protection equal to the protection of local firms if it is a legal entity in which the...
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This thesis reviews and evaluates the development of privatization within the CEE region during the last 25 years. The author wishes to reveal the critical success factors that shaped the performance of privatization, by describing the... more
This thesis reviews and evaluates the development of privatization within the CEE region during the last 25 years. The author wishes to reveal the critical success factors that shaped the performance of privatization, by describing the motives and determinants that encouraged the process and by underlining the unique contextual characteristics that varied across the major transition economies (e.g. Czech Republic, Hungary, Poland, Romania), Accordingly, the legislative and political frameworks, early acceptance of FDI inflows, privatization techniques, and the competitive strength, are several aspects that influenced the early implementation and success of a powerful private sector. In order to confer a better understanding with respect to the privatization model advanced by the Romanian governments, the author investigates the impact of the Austrian FDI on the national economy, by examining two representative case studies. Firstly, the ownership transfer of the Romanian Commercial ...
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Edited by Kalman Kalotay, this publication contains essays by 11 economists: Predrag Bjelić, Piergiuseppe Fortunato, Torbjörn Fredriksson, Maria Alejandra Gonzalez-Perez, Jan Hoffmann, the volume's editor, Michael Lim, Jörg Mayer,... more
Edited by Kalman Kalotay, this publication contains essays by 11 economists: Predrag Bjelić, Piergiuseppe Fortunato, Torbjörn Fredriksson, Maria Alejandra Gonzalez-Perez, Jan Hoffmann, the volume's editor, Michael Lim, Jörg Mayer, Simon Mevel, Mia Mikic and Maler Vilee, written on the occasion of Mohan Panicker's retirement from UNCTAD, after managing its most successful training programme, the flagship "Paragraph 166" courses on Key Issues on the International Economic Agenda since their inception in 2002. The production of the publication was managed by Khaled Gaafar, and the cover page designed by Sophie Combette.
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The presentation deals with five topics: 1. What are the “emerging” markets? 2. In&out data for FDI; general features? 3. Zoom on State-owned multinationals; are they from emerging markets? 4. Do they grow? 5. Are we challenged?... more
The presentation deals with five topics: 1. What are the “emerging” markets? 2. In&out data for FDI; general features? 3. Zoom on State-owned multinationals; are they from emerging markets? 4. Do they grow? 5. Are we challenged? Are we concerned?
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Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the... more
Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the need for economic theory to explain their activities (for example [Dunning 1977] and [Vernon, 1971]). In Hungary, Andras Blaho ([1980]) was among the first ones to note their importance in the world economy in general and in the organization of international production in particular. He built his observations in part on the findings of other Hungarian economists observing the MNE phenomenon since the early 1960s (for example Mihaly Simai [1962]). It is therefore no coincidence that Hungary became, after the political change of 1989–1990 and its early on opening to FDI (see for example [Sass 2004]), one of the main regional centres of research on FDI.
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<p>This chapter examines how multinational enterprises (MNEs) headquartered in the region or investing from outside manage their production capacities in Central and Eastern Europe (CEE) through inward and outward foreign direct... more
<p>This chapter examines how multinational enterprises (MNEs) headquartered in the region or investing from outside manage their production capacities in Central and Eastern Europe (CEE) through inward and outward foreign direct investment (FDI), or other forms of engagement of those firms in host countries. It shows that Western and intra-regional MNEs adjust their strategies to local conditions dictated by the regulatory framework of individual host countries, the availability and quality of local business partners, and the quality of available skills and infrastructure. It points at different ways through which local and international MNEs adapt their production plans to a context that in the bulk of the region can be called "post-transition." These choices in turn affect the decisions that different types of MNEs take in locating various parts of their value chains in the region, and their strategies vis-à-vis the upgrading or relocation of existing capacities.</p>
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A tanulmany az orosz cegek visegradi orszagokban vegrehajtott beruhazasainak fő jellemzőit es motivacioit vizsgalja. Fő kovetkeztetese, hogy a nemzetkozi befektetesek meglevő elmeletei - Dunning eklektikus paradigmajanak kivetelevel -... more
A tanulmany az orosz cegek visegradi orszagokban vegrehajtott beruhazasainak fő jellemzőit es motivacioit vizsgalja. Fő kovetkeztetese, hogy a nemzetkozi befektetesek meglevő elmeletei - Dunning eklektikus paradigmajanak kivetelevel - kevesse kepesek megmagyarazni az orosz multinacionalis vallalatok visegradi orszagokbeli tevekenyseget. Ezert az orosz befektetők tulajdonosi előnyeit elsősorban a dunningi eklektikus paradigma segitsegevel elemzi, megfelelően igazitva azt az adott vallalati kor sajatossagaihoz. A cikk a statisztikai jellemzőkon tul a legfontosabb, visegradiakba befektető, orosz cegeket is bemutatja. Ezek kozott a kőolaj- es foldgaz-, az acelipari es atomenergetikai, valamint a piac- es erőforras-orientalt allami tulajdonu vagy allamhoz kozel allo orosz vallalatok hajtjak vegre a legjelentősebb beruhazasokat. Tovabba - bar joval kisebb szamban - jelen vannak innovativ orosz maganvallalatok is, amelyek sokban hasonlitanak a fejlett orszagok multinacionalis vallalataira....
When Opel invested in car assembly operations in Gliwice in 1998, Poland registered this project as German because Opel is headquartered in, and managed from, Germany. However Opel has been owned by General Motors (United States) since... more
When Opel invested in car assembly operations in Gliwice in 1998, Poland registered this project as German because Opel is headquartered in, and managed from, Germany. However Opel has been owned by General Motors (United States) since 1929. Such utilization of foreign affiliates for investment in third countries is " indirect foreign direct investment " (indirect FDI). At first sight the term is contradictory, although it is not so: " direct " refers to the degree of control over a foreign affiliate, while " indirect " denotes the way the ultimate owner arrives at such control. Indirect FDI matters for host countries because an investor follows a distinct corporate strategy, which is influenced by the management culture of the investor's home country. If projects are transparent, host countries face few problems with indirect FDI. There are however cases in which the ultimate owners conceal their identities to circumvent sensitivities about their n...
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The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was... more
The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was the result of underlying trends that started before the pandemic but accentuated by the latter, creating a “perfect storm”. These secular trends include the digitalisation of production and the birth of Industry 4.0, resulting in more asset-light international production and reorganisations of company networks, the sustainability imperative, making the impact of FDI more relevant than its quantity, and a slowdown in the liberalisation of the policy framework for FDI both in individual countries and at the multilateral level. The recovery of FDI from the shock of 2020 is expected to be long and it will be impossible to return to the pre-pandemic structural and geographical patterns. Building resilience and diversification of production at the expense...
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This presentation examines changes in global foreign direct investment (FDI) flows and stocks in the past quarter of century (1991–2016) for countries and territories for which data are available. It also asks how those changes affect our... more
This presentation examines changes in global foreign direct investment (FDI) flows and stocks in the past quarter of century (1991–2016) for countries and territories for which data are available. It also asks how those changes affect our way of explaining FDI and other activities of multinational enterprises (MNEs), and draws basic public policy conclusions from the evolving landscape of FDI and our understanding about the main driving forces behind those changes.
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They are barely visible on the global scene. But it is in part so because official statistics have difficulties in reflecting their real size. They are nevertheless gaining in importance, representing a challenge for those who want to... more
They are barely visible on the global scene. But it is in part so because official statistics have difficulties in reflecting their real size. They are nevertheless gaining in importance, representing a challenge for those who want to understand why and how they expand. Analysts are at the beginning of their quest for explaining how transnational corporations from economies in transition fit into a new “zoology” of international business, in which there is space for many more species than previously believed. Policy makers in economies in transition, too, are trying to grasp with the dilemma that outward FDI presents for them: on the one hand, it strengthens the international competitiveness of the firms; on the other, it is an outflow of resources. On balance, some of the countries in transition, e.g. Hungary and Slovenia, have decided to promote outward FDI.
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In December 2014, the Russian Federation plunged into a crisis again, the fourth one in a quarter of a century. Crises came in pairs, just like earthquakes and aftershocks: 1992–1996, followed by 1998; then 2009, followed by the current... more
In December 2014, the Russian Federation plunged into a crisis again, the fourth one in a quarter of a century. Crises came in pairs, just like earthquakes and aftershocks: 1992–1996, followed by 1998; then 2009, followed by the current one. The new crisis will affect the economic prospects of Russia and its partner countries through two main channels: trade and investment. On balance, important drops are expected in both inward and outward FDI, to feed back to the crisis itself. The main channels of transmission are varied. In principle, the decline of the ruble stimulates new inward FDI (although it hits already established affiliates), and discourages new outward FDI, especially by natural-resource-based firms, which are also plagued by the fall in oil prices. A potential exception is exodus capital wishing to establish safety nests abroad, although these actors, too, will have to pay more rubles for the dollars to be invested abroad. As for the increasingly hostile Western attit...
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In the 1990s, Hungary used to be a front-runner among Central and Eastern European countries in terms of attracting foreign direct investment (FDI). At that time, it attracted FDI both through the privatization of state-owned enterprises... more
In the 1990s, Hungary used to be a front-runner among Central and Eastern European countries in terms of attracting foreign direct investment (FDI). At that time, it attracted FDI both through the privatization of state-owned enterprises to foreign multinational enterprises (MNEs), and through Greenfield investment by foreign MNEs in export-oriented manufacturing (especially automotive and electronics). Almost two decades later, the economy is still a major host of FDI, with inflows of US$ 4.7 billion in 2011, although it has lost its privileged status within the region. Its policy approach to inward FDI (IFDI), too, has undergone changes over the past two decades: from being a country that was the first in Central and Eastern Europe to open its economy fully to FDI and offer incentives for it, it has moved to being one with more selective policies. The Government still successfully encourages FDI in export-oriented production (particularly automotive); however, in utilities, bankin...
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Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both... more
Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both foreign market entry strategies and operation methods of Russian companies are discussed. The chapter begins with a brief overview of relevant literature, followed by an overall picture of foreign acquisitions carried out by Russian firms. Next, selected cases of foreign acquisitions are analysed, aiming at finding out the main motivations and main competitive advantages of the firms involved in those transactions. The subsequent section consists of snapshots of MNEs in Russian oil and gas and metallurgy industries, and in non-resource-based industries. It is followed by a short survey of failures and half-failures in the foreign acquisitions of Russian firms. At the end of the chapter we conclude by discussing how our findings can advance new research on Russian MNEs and predict the future of developing their competitive advantage through M&A.
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The Western Balkans is a politically fragmented subregion, possessing moderate levels natural resources, and lagging behind the rest of Europe in terms of income. Integration into the European Union offers the only feasible perspective to... more
The Western Balkans is a politically fragmented subregion, possessing moderate levels natural resources, and lagging behind the rest of Europe in terms of income. Integration into the European Union offers the only feasible perspective to overcome deep-rooted divisions, and to speed up progress on the road to prosperity. It can also act as a catalyst for more foreign direct investment inflows. However no large increase can be expected given the modest business opportunities of the subregion, and the fact that business entities have a gradualist approach to changes: certain measures are already factored into their locational decisions, while other will be acknowledged only on the longer term. Moreover, the Western Balkans needs to develop a strategy of attracting niche projects as it can not expect to divert investment on a large scale from countries in transition that are already members of the Union.
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This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is different from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and... more
This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is different from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and tax considerations. The development impact of indirect FDI is not necessarily negative; however it varies by the key types of indirect FDI (delegation of power to regional headquarters, nearshoring, concealed investment, and round tripping). It also depends on how the project money is transhipped: through an affiliate abroad, or through a special purpose entity. Government polices may influence largely the extent and development impact of indirect FDI, especially through tax policies. The phenomenon deserves more attention in the future, as currently indirect FDI is an under-researched topic.
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ABSTRACT This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017,... more
ABSTRACT This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017, although at a slow speed. Going beyond the values forecast by the model, we can also expect a relatively slow but steady growth in the late 2010s. However,modeling and forecasting cannot fully take into consideration one-off shocks, which are still not excluded given the vulnerabilities of the world economy.The main reason for limited potential growth of foreign direct investment and its vulnerability is the relative openness of the Baltic Sea Region to external shocks. However, on balance, the growth of foreign direct investment in the region can be still faster than in other parts of the world, thanks to the solid macroeconomic bases of the region&#39;s economies.
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This essay examines the impact of the global economic crisis on foreign direct investment (FDI), with special reference to the new member states of the European Union (EU). It has to be emphasised that FDI has reacted to the crisis... more
This essay examines the impact of the global economic crisis on foreign direct investment (FDI), with special reference to the new member states of the European Union (EU). It has to be emphasised that FDI has reacted to the crisis differently from portfolio investment, due to differences between the two. Although portfolio investment and FDI both entail ownership of shares, this ownership is fundamentally different. Portfolio investment is limited to minority participation (usually less than 10% of shares), and as a rule, it has no management influence and pursues purely financial interest. Therefore, it has short-term or temporary time range. On the other hand, FDI implies major or even full ownership and strong management influence.
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The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was... more
The immediate effects of COVID-19 on the global flows of foreign direct investment (FDI) were devastating, resulting in a large drop. Flows to the Visegrad countries were also affected but less than the world average. The fall in FDI was the result of underlying trends that started before the pandemic but accentuated by the latter, creating a "perfect storm". These secular trends include the digitalisation of production and the birth of Industry 4.0, resulting in more asset-light international production and reorganisations of company networks, the sustainability imperative, making the impact of FDI more relevant than its quantity, and a slowdown in the liberalisation of the policy framework for FDI both in individual countries and at the multilateral level. The recovery of FDI from the shock of 2020 is expected to be long and it will be impossible to return to the pre-pandemic structural and geographical patterns. Building resilience and diversification of production at the expense of the search for the lowest-cost locations will be the top priorities of investors, forcing the host countries to revise their investment promotion strategies focused on cost reduction. In the Visegrad countries, the model based on low labour costs will sooner or later reach its limits.
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The war in Ukraine started in February 2022 adds major uncertainties to foreign direct investment (FDI) to and from the Russian Federation and affects it negatively in the short, medium and long run. The degree of the hit will depend on... more
The war in Ukraine started in February 2022 adds major uncertainties to foreign direct investment (FDI) to and from the Russian Federation and affects it negatively in the short, medium and long run. The degree of the hit will depend on the exact contents of sanctions and counter-sanctions, not fully known yet. However, the severe consequences of some of them are already visible, adding to the financial strain caused by the war. FDI to and from Russia is expected to fall drastically in 2022 and, depending on the length and depth of the conflict, in the subsequent years if no exit strategy is developed fast to stop the conflict and its eventual escalation. This study concludes that the fall in FDI will at the end hurt the economic capacities of the Russian Federation already affected by a previous round of sanctions imposed in 2014. Decoupling of the Russian economy from FDI partners works, if it works, only partially, and at a relatively high cost. That in turn could thwart the very economic fundamentals of the war effort.
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FDI and economic transformation in Sub-saharan Africa: paper prepared for the Midlands State University 1st International Research Conference: Driving Socio-Economic Development through Value Addition and Sustainable use of Resources held at Elephant Hills Resort, Victoria Falls, Zimbabwe 14-16 Julymore
Foreign direct investment (FDI) is widely considered one essential element for achieving sustainable development. This paper seeks to establish how much of the FDI activities in Sub-Saharan Africa (SSA) have translated into economic... more
Foreign direct investment (FDI) is widely considered one essential element for achieving sustainable development. This paper seeks to establish how much of the FDI activities in Sub-Saharan Africa (SSA) have translated into economic benefit for the host countries. It extends the analysis of aggregate FDI-growth relationships to intra and inter-sector spill-over effects, thereby reconciling the often inconclusive evidence on the growth impact of FDI in SSA. An interrogation of the figures in an econometric estimation of the FDI-growth relationship reveals that while FDI may seem like a key phenomenon of the century when measured by the rate it has been growing in Africa, this international interest in the region is yet to be translated into generation of livelihood and growth opportunities for recipient countries. The findings are important in light of Zimbabwe’s current economic woes characterized by low FDI inflows. FDI attraction has been proffered as a panacea to the current re...
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The former Soviet Union disintegrated three decades ago. That momentous 1991 was not only the starting point for independence of the countries of the post-Soviet space but also the starting point for their transformation from centrally... more
The former Soviet Union disintegrated three decades ago. That momentous 1991 was not only the starting point for independence of the countries of the post-Soviet space but also the starting point for their transformation from centrally planned economy to capitalism, often with local specificities. At the moment of writing this article aiming at analysing the long-term, structural characteristics of inward and outward foreign direct investment (FDI), these 12 economies are facing new COVID-19-related challenges, different from the problems of transformation undertaken in the past decades. After a brief literature survey, in which the main issues raised by academic research are highlighted, the article analyses the long-term trends and the main characteristics (geographical and sectoral) of FDI, with special reference to greenfield project announcements from 2003 on (the starting year of data availability). It also explores how much economic development was based on either attracting ...
SUMMARY Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and... more
SUMMARY Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and unregistered in the balance of payments, or misregistered under other items. Since 2003, their recording has improved. However, the question remains: how can a lower-middle income country become a net capital exporter? It is supposed to be the combined result of economic and political factors ...
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Abstract The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from... more
Abstract The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from labor productivity—not from lower taxes and large transfers from the European Union budget, as is sometimes claimed. Compared to opportunities, the foreign direct investment inflows of the new members have been so far small and slow-growing. Part of this performance may be due to the wrapping ...
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Abstract In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region&amp;amp;amp;#x27;s reintegration into the world economy as trade liberalisation used to be in the... more
Abstract In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region&amp;amp;amp;#x27;s reintegration into the world economy as trade liberalisation used to be in the early 1990s or inward foreign direct investment is currently. In the terminology of the investment–development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer status of the ...
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ABSTRACT Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s,... more
ABSTRACT Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the country’s privatization process. Their outward investment started to grow fast only a decade later, but has weathered the global crisis relatively well. The majority of these multinationals are based on natural resource extraction, heavy industries (metallurgy) and selected services such as telecommunications and banking. Given these characteristics, it is not surprising that they opt for acquisitions as a preferred mode of market entry in their quest of fast conquest of markets abroad. This chapter analyses the main features of the foreign acquisitions of Russian firms such as the overall drive of Russian firms to control the value chain of their product, be it oil and gas, metals, food, banking services or telecommunications. It puts the analysis into the context of the full Russian market for acquisitions (dominated by local deals but also containing inward and outward investment) and of total foreign direct investment (FDI). The chapter also examines the main characteristics of the mega-deals carried out by Russian firms, such as their use to leapfrog into the global scene without passing the regional route. The concluding part attempts to answer the question if the recent speed of foreign acquisitions is sustainable under the new conditions of the global crisis.
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Abstract: In the 1990s, Hungary used to be a front-runner among Central and Eastern European countries in terms of attracting foreign direct investment (FDI). At that time, it attracted FDI both through the privatization of state-owned... more
Abstract: In the 1990s, Hungary used to be a front-runner among Central and Eastern European countries in terms of attracting foreign direct investment (FDI). At that time, it attracted FDI both through the privatization of state-owned enterprises to foreign multinational enterprises (MNEs), and through Greenfield investment by foreign MNEs in export-oriented manufacturing (especially automotive and electronics). Almost two decades later, the economy is still a major host of FDI, with inflows of US $4.7 billion in 2011, ...
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Alfejezetek: 1. Megjegyzések a vitaindító elméleti keretével kapcsolatban: Mennyiségi modellalapok, Minőségi modellalapok, „Exportmechanizmusok”, Modellbefogadó társadalmak; 2. Megjegyzések a közvetlentőke-befektetések („FDI”) szerepéről;... more
Alfejezetek: 1. Megjegyzések a vitaindító elméleti keretével kapcsolatban: Mennyiségi modellalapok, Minőségi modellalapok, „Exportmechanizmusok”, Modellbefogadó társadalmak; 2. Megjegyzések a közvetlentőke-befektetések („FDI”) szerepéről; 3. Két részletes észrevétel; 4. Kitekintés
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This report reviews the patterns of United States foreign direct investment (FDI) in the Baltic Sea region and selected related key policy issues. American investment in the region has not lived up its potential, and has been on a... more
This report reviews the patterns of United States foreign direct investment (FDI) in the Baltic Sea region and selected related key policy issues. American investment in the region has not lived up its potential, and has been on a downward trend, in contrast to a good potential for its expansion found in some studies. Moreover, US FDI is unevenly distributed, with Germany attracting the bulk of it, related to its large market and technology assets. The report indicates the adverse effects of the current protectionist trends in the world economy on American investment in the region, especially in relatively smaller and more open economies. It also show that the abandoning of negotiations on the Transatlantic Trade and Investment Partnership can have long-term negative repercussions for bilateral investment flows, and the sanctions wars between the United States and the Russian Federation has created further obstacles to US investment to the region. While focus has been mostly on medium to long-term issues, the report also analyses the one-off shock of the US tax reform in 2018, predicting a recovery of flows in 2019 and beyond.
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Benefitting from the publication of a new data set by the United Nations Conference on Trade and Development (UNCTAD) in 2017, this article examines the main characteristics in the realm of state-owned multinationals, especially in terms... more
Benefitting from the publication of a new data set by the United Nations Conference on Trade and Development (UNCTAD) in 2017, this article examines the main characteristics in the realm of state-owned multinationals, especially in terms of their geographical origin, the target countries of outward investment, and other main features of multinationals' foreign direct investment (FDI). It finds that state-owned multinationals continue to play an important role in the world economy. Many of these multinationals are headquartered in emerging economies, confirming the reliance of these economies on multinational firms for foreign expansion strategies. There are also many state-owned multinationals headquartered in developed economies. The modalities of state intervention vary largely by country and firm. Nevertheless, in general, state-owned multinationals raise concerns about the non-economic motivations of foreign expansion.
This chapter examines how multinational enterprises (MNEs) headquartered in the region or investing from outside manage their production capacities in Central and Eastern Europe (CEE) through inward and outward foreign direct investment... more
This chapter examines how multinational enterprises (MNEs) headquartered in the region or investing from outside manage their production capacities in Central and Eastern Europe (CEE) through inward and outward foreign direct investment (FDI), or other forms of engagement of those firms in host countries. It shows that Western and intra-regional MNEs adjust their strategies to local conditions dictated by the regulatory framework of individual host countries, the availability and quality of local business partners, and the quality of available skills and infrastructure. It points at different ways through which local and international MNEs adapt their production plans to a context that in the bulk of the region can be called “post-transition.” These choices in turn affect the decisions that different types of MNEs take in locating various parts of their value chains in the region, and their strategies vis-à-vis the upgrading or relocation of existing capacities.
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This presentation examines changes in global foreign direct investment (FDI) flows and stocks in the past quarter of century (1991–2016) for countries and territories for which data are available. It also asks how those changes affect our... more
This presentation examines changes in global foreign direct investment (FDI) flows and stocks in the past quarter of century (1991–2016) for countries and territories for which data are available. It also asks how those changes affect our way of explaining FDI and other activities of multinational enterprises (MNEs), and draws basic public policy conclusions from the evolving landscape of FDI and our understanding about the main driving forces behind those changes.
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Benefitting from the publication of a new data set by the United Nations Conference on Trade and Development (UNCTAD) in 2017, this presentation examines the main characteristics of the universe of State-owned multinationals, especially... more
Benefitting from the publication of a new data set by the United Nations Conference on Trade and Development (UNCTAD) in 2017, this presentation examines the main characteristics of the universe of State-owned multinationals, especially in terms of geographical origin, target countries of outward investment and other main features of their foreign direct investment (FDI). It finds that State-owned multinationals continue play an important role in the world economy. Many of these multinationals are headquartered in emerging economies, confirming their reliance on these firms for their foreign expansion strategies. There is however also large number of State-owned multinationals coming from developed economies. The modalities of State intervention vary largely by country and firm. Nevertheless, in general, State-owned multinationals raise concerns about the non-economic motivations of their foreign expansion.
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In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region's reintegration into the world economy, especially when compared to trade liberalization in the early 1990s or... more
In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region's reintegration into the world economy, especially when compared to trade liberalization in the early 1990s or inward foreign direct investment in the late 1990s. In the terminology of the investment-development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer status of the region's transnational corporations and the transition shock can explain most of that laggard situation. It hypothesizes that the imminent enlargement of the European Union would give a major push to the outward foreign direct investment flows of Central and Eastern Europe, on condition that adequate government policies to promote those investments are put in place. The impact on the investment-development path, however, is uncertain, because accession to the European Union is often accompanied by a surge in foreign direct investment inflows, too. Finally, the article also looks at the options available to deal with the specific problems of the Russian Federation in relation to capital flight, including ways of regularization and potential return to the home economy.
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Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the... more
Foreign direct investment (FDI) is far from being a new phenomenon; its spectacular rise and dispersion are. Back in the 1970s and 1980s, there were researchers who already noted the presence of multinational enterprises (MNEs) and the need for economic theory to explain their activities (for example [Dunning 1977] and [Vernon, 1971]). In Hungary, András Blahó ([1980]) was among the first ones to note their importance in the world economy in general and in the organization of international production in particular. He built his observations in part on the findings of other Hungarian economists observing the MNE phenomenon since the early 1960s (for example Mihály Simai [1962]). It is therefore no coincidence that Hungary became, after the political change of 1989–1990 and its early on opening to FDI (see for example [Sass 2004]), one of the main regional centres of research on FDI.
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This article attempts to apply the flying geese metaphor to emerging foreign direct investment (FDI) patterns in Europe and the Mediterranean. Such a division of labour is at best at a nascent stage, given the overwhelming share of... more
This article attempts to apply the flying geese metaphor to emerging foreign direct investment (FDI) patterns in Europe and the Mediterranean. Such a division of labour is at best at a nascent stage, given the overwhelming share of Western Europe in both inward and outward foreign direct investment flows. Because of these imbalances, special attention is to be paid to Central and Eastern Europe’s (CEE) potential, both in the group joining the European Union (EU) in 2004 and the rest of the subregion. For the former, middle-income countries, risks in investment promotion are related to uncertainty brought about by the transition to European Union’s acquis and an eventually too fast increase in production costs. Policy response to that requires a modernisation of both general and specific investment promotion policies, adjusted to the rules of the Union. For the rest of Central and Eastern Europe, the challenge is to adjust to the enlarged European Union and to improve the business and investment environment, in order to capture the foreign direct investment outflows of other European countries searching for optimum labour costs.
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The Brady Plan was declared in Brookings Institution the 10th of March, 1989 by American Secretary of Treasury Brady. Its essence and importance can be found in the proposal to reduce claims of commercial banks. The role of" fever... more
The Brady Plan was declared in Brookings Institution the 10th of March, 1989 by American Secretary of Treasury Brady. Its essence and importance can be found in the proposal to reduce claims of commercial banks. The role of" fever reducer" is played by various methods of debt swap and debt exchange while that of" medicine" is played by economic policy conditions. Whether they want to participate or not, the Brady Plan rearranges the circumstances of debt service also for the socialsit countries.
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For the majority of the developing countries, the 1980s were passing under the hangover of the debt crisis. Their gross debt, estimated around 1300 billion US dollars in 1990, implies such a huge amount of debt service that can be less... more
For the majority of the developing countries, the 1980s were passing under the hangover of the debt crisis. Their gross debt, estimated around 1300 billion US dollars in 1990, implies such a huge amount of debt service that can be less and less financed with the help of new money. This fact focusses a new light on the so-called transfer issue, one of the oldest problems of the developing world.
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Globalization of R & D and Developing Countries: Proceedings of the Expert Meeting, Geneva, 24-26 January 2005. Kalmán Kalotay, Thomas Pollan, Torbjörn Fredriksson UN, 2005.
SIDALC - Alianza de Servicios de Información Agropecuaria.
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In December 2014, the Russian Federation plunged into a crisis again, the fourth one in a quarter of a century. Crises came in pairs, just like earthquakes and aftershocks: 1992–1996, followed by 1998; then 2009, followed by the current... more
In December 2014, the Russian Federation plunged into a crisis again, the fourth one in a quarter of a century. Crises came in pairs, just like earthquakes and aftershocks: 1992–1996, followed by 1998; then 2009, followed by the current one. The new crisis will affect the economic prospects of Russia and its partner countries through two main channels: trade and investment. On balance, important drops are expected in both inward and outward FDI, to feed back to the crisis itself. The main channels of transmission are varied. In principle, the decline of the ruble stimulates new inward FDI (although it hits already established affiliates), and discourages new outward FDI, especially by natural-resource-based firms, which are also plagued by the fall in oil prices. A potential exception is exodus capital wishing to establish safety nests abroad, although these actors, too, will have to pay more rubles for the dollars to be invested abroad. As for the increasingly hostile Western attitude towards Russia, including economic sanctions, it will hinder both inward and outward FDI, with the exception of inbound round-tripping as it is carried out by foreign firms owned by Russians. In turn, certain transactions, especially by natural-resource-based State-owned and State-related firms put on the sanctions list, as well as outbound round-tripping and transhipment, which will be seen as attempts towards circumventing the sanctions, will face strong scrutiny and opposition in the EU and the United States. And if the clash with the West goes on for a longer time, even technology-based outbound FDI may face negative policy reactions in host countries.
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Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the... more
Compared with the majority of emerging-market investors, Russian multinationals are latecomers to the global business scene. The majority of the large Russian firms that we know today were established only in the mid-1990s, during the country’s privatization process. Their outward investment started to grow fast only a decade later, but has weathered the global crisis relatively well. The majority of these multinationals are based on natural resource extraction, heavy industries (metallurgy) and selected services such as telecommunications and banking. Given these characteristics, it is not surprising that they opt for acquisitions as a preferred mode of market entry in their quest of fast conquest of markets abroad. This chapter analyses the main features of the foreign acquisitions of Russian firms such as the overall drive of Russian firms to control the value chain of their product, be it oil and gas, metals, food, banking services or telecommunications. It puts the analysis into the context of the full Russian market for acquisitions (dominated by local deals but also containing inward and outward investment) and of total foreign direct investment (FDI). The chapter also examines the main characteristics of the mega-deals carried out by Russian firms, such as their use to leapfrog into the global scene without passing the regional route. The concluding part attempts to answer the question if the recent speed of foreign acquisitions is sustainable under the new conditions of the global crisis.
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This working paper analyses investment by Russian firms in the four Visegrád countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, we rely on case studies to present the... more
This working paper analyses investment by Russian firms in the four Visegrád countries, their motivations and ownership advantages, based mostly on the eclectic paradigm. Beside statistical data, we rely on case studies to present the profile of the most important Russian investors in each host country. The Visegrád countries have attracted less Russian investment than their economic importance would warrant, due to various factors, most notably the joint effects of reticence in host countries and firm strategies that do not necessarily see the subregion as a major priority. Most of the Russian investment examined is market, and to a lesser extent, resource seeking, concentrated in the hydrocarbons, steel and nuclear energy industries, often dominated by state-owned firms. Some innovative private Russian companies, with features similar to developed-country multinationals, can also be identified. Extant investment theories with the exception of the eclectic paradigm fall short of explaining Russian investment. This paper suggests that further analysis is needed on the role of the home country in stimulating outward investment and directing it to specific locations.
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This article looks at the fallout of the Ukrainian/Crimean crisis for the foreign economic relations of the Russian Federation, including outward foreign direct investment (FDI). It notes the multiplicity of interests such policies have... more
This article looks at the fallout of the Ukrainian/Crimean crisis for the foreign economic relations of the Russian Federation, including outward foreign direct investment (FDI). It notes the multiplicity of interests such policies have to satisfy. One of them is the protection of Russian interest, real or perceived, in the wider European region. Recent events leading to open conflicts in the Crimea and Eastern Ukraine can be indeed explained as a clash between Russia and the West about the future of these Ukrainian regions in the international division of labour. This article argues that the economic consequences for Russia are mostly negative, both in general terms, and concerning the interests of Russian outward FDI. In the latter case, the impact goes beyond the economic sanctions, initiated by the European Union and the United States. General Assembly Resolution 68/262 indicates that the majority if international community has taken its distance from the Russian point of view, and can consider measures much softer than sanctions in three areas: merger control (blocking the acquisition of “strategic” assets), access to finance (banking); and anti-corruption measures.
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The former Soviet periphery is not a major interest for international business scholars. This is partly understandable as these are small and little known economies, hidden behind the center of the Soviet Union until its break-up in 1991.... more
The former Soviet periphery is not a major interest for international business scholars. This is partly understandable as these are small and little known economies, hidden behind the center of the Soviet Union until its break-up in 1991. After gaining independence in 1991, these peripheral countries underwent a transition which proved to be more painful than in other parts of the formally centrally planned world. Nevertheless, their policy makers carried out major efforts towards economic reforms. Still, given their handicaps, their countries have attracted modest inflows of foreign investment, although fast growing over the past decade. Given this new-found dynamism, a partial rebalancing of attention of research in favor of these economies would be welcome.
Research Interests: Transition and FDI
In March 2013, as a new episode of the Great Crisis that started in 2008 and whose end is not yet at sight, Eurozone members and the International Monetary Fund offered a €10 billion rescue loan for fellow member Cyprus – representing... more
In March 2013, as a new episode of the Great Crisis that started in 2008 and whose end is not yet at sight, Eurozone members and the International Monetary Fund offered a €10 billion rescue loan for fellow member Cyprus – representing more than half of its gross domestic product. Bailout would come with conditions, which will weaken Cyprus’ traditional role as an offshore financial centre within the European Union. In the two largest banks of the island on the verge of bankruptcy, only deposits up to €100,000 were to be saved; the rest would disappear of suffer from a huge discount. As a symbolic measure, depositors might be offered shares in the banks concerned, although their real value would be close to nil due to the bad shape of those financial institutions. While these were already heavy blows, capital controls required to stabilize Cyprus in the short and medium term heralded the effective end of the offshore financial centre of the island. These developments were bad news for Russian investors, which used the island as the most important platform for their trans-shipped and round-tripped foreign direct investment (FDI).While Russian investors could probably not foresee the degree of measures Cyprus would be forced to engage in, the financial crisis had prompted them to think of strategies not putting all eggs into the same basket. The most salient trend in this respect is the rise of other offshore financial centres in Russian inward and outward FDI, especially that of the British Virgin Islands. The Cyprus bailout package can be expected to accelerate the shift of Russian corporate strategies to new offshore financial centres.
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This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017, although... more
This article models the long-term prospects of foreign direct investment in the Baltic Sea Region. After the turbulences of the crisis years and an idiosyncratic decline in 2012, these flows are expected to recover in 2013–2017, although at a slow speed. Going beyond the values forecast by the model, we can also expect a relatively slow but steady growth in the late 2010s. However,modeling and forecasting cannot fully take into consideration one-off shocks, which are still not excluded given the vulnerabilities of the world economy.The main reason for limited potential growth of foreign direct investment and its vulnerability is the relative openness of the Baltic Sea Region to external shocks. However, on balance, the growth of foreign direct investment in the region can be still faster than in other parts of the world, thanks to the solid macroeconomic bases of the region's economies.
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Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both... more
Analysis in this chapter revolves around two main questions: (1) Why do Russian multinational enterprises (MNEs) choose acquisitions as an entry mode? and (2) Which competitive advantages do they reach via acquisitions abroad? Both foreign market entry strategies and operation methods of Russian companies are discussed. The chapter begins with a brief overview of relevant literature, followed by an overall picture of foreign acquisitions carried out by Russian firms. Next, selected cases of foreign acquisitions are analysed, aiming at finding out the main motivations and main competitive advantages of the firms involved in those transactions. The subsequent section consists of snapshots of MNEs in Russian oil and gas and metallurgy industries, and in non-resource-based industries. It is followed by a short survey of failures and half-failures in the foreign acquisitions of Russian firms. At the end of the chapter we conclude by discussing how our findings can advance new research on Russian MNEs and predict the future of developing their competitive advantage through M&A.
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The Western Balkans is a politically fragmented subregion, possessing moderate levels natural resources, and lagging behind the rest of Europe in terms of income. Integration into the European Union offers the only feasible perspective to... more
The Western Balkans is a politically fragmented subregion, possessing moderate levels natural resources, and lagging behind the rest of Europe in terms of income. Integration into the European Union offers the only feasible perspective to overcome deep-rooted divisions, and to speed up progress on the road to prosperity. It can also act as a catalyst for more foreign direct investment inflows. However no large increase can be expected given the modest business opportunities of the subregion, and the fact that business entities have a gradualist approach to changes: certain measures are already factored into their locational decisions, while other will be acknowledged only on the longer term. Moreover, the Western Balkans needs to develop a strategy of attracting niche projects as it can not expect to divert investment on a large scale from countries in transition that are already members of the Union.
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Abstract: Since economic transition started, a close relationship has developed between privatization and foreign direct investment.
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The economic crisis which started to affect the world economy in 2008 has affected the sustainability and future course of all global phenomena, including foreign direct investment (FDI) carried out by multinational enterprises (MNE). In... more
The economic crisis which started to affect the world economy in 2008 has affected the sustainability and future course of all global phenomena, including foreign direct investment (FDI) carried out by multinational enterprises (MNE). In world FDI flows, the year 2008 marked the end of a cycle: As the crisis unfolded and corporate and project finance was weakening, all kinds of equity investment including FDI came under pressure. At the “epicentre” of the crisis, developed countries suffered from a fall of FDI by 25% in 2008, compared to a decline of 15% globally. In contrast, FDI increased by 7% in developing countries and 24% in South-East Europe and the Commonwealth of Independent States. Evidence for the new EU member states remained mixed: FDI inflows continued to growth by 34% in Romania, 8% in Hungary and 3% in the Czech Republic, but fell in Poland (-28%).
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Research Interests: Russia and Outward FDI
This essay examines the impact of the global economic crisis on foreign direct investment (FDI), with special reference to the new member states of the European Union (EU). It has to be emphasised that FDI has reacted to the crisis... more
This essay examines the impact of the global economic crisis on foreign direct investment (FDI), with special reference to the new member states of the European Union (EU). It has to be emphasised that FDI has reacted to the crisis differently from portfolio investment, due to differences between the two. Although portfolio investment and FDI both entail ownership of shares, this ownership is fundamentally different. Portfolio investment is limited to minority participation (usually less than 10% of shares), and as a rule, it has no management influence and pursues purely financial interest. Therefore, it has short-term or temporary time range. On the other hand, FDI implies major or even full ownership and strong management influence (Dunning & Lundan, 2008).
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Research Interests: Hungary and Outward FDI
The Russian Federation is a laggard country in terms of the internationalization of its high-technology (high-tech) industries. This is quite paradoxical, as the country has in principle all the ingredients required for a more vigorous... more
The Russian Federation is a laggard country in terms of the internationalization of its high-technology (high-tech) industries. This is quite paradoxical, as the country has in principle all the ingredients required for a more vigorous insertion into the global network of high-tech activities: a strong science, technology and innovation based inherited from Soviet times (slightly eroded since then), a vast and well trained labour pool (with skills again a bit eroded but still important), and recently large foreign direct investment (FDI) inflows and outflows. Indeed, by 2010, the country had become the 8th largest recipient of the world in terms of FDI inflows ($41 billion) and also the 8th largest source of the world in terms of FDI outflows ($52 billion).
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When Opel invested in car assembly operations in Gliwice in 1998, Poland registered this project as German because Opel is headquartered in, and managed from, Germany. However Opel has been owned by General Motors (United States) since... more
When Opel invested in car assembly operations in Gliwice in 1998, Poland registered this project as German because Opel is headquartered in, and managed from, Germany. However Opel has been owned by General Motors (United States) since 1929. Such utilization of foreign affiliates for investment in third countries is “indirect foreign direct investment” (indirect FDI). At first sight the term is contradictory, although it is not so: “direct” refers to the degree of control over a foreign affiliate, while “indirect” denotes the way the ultimate owner arrives at such control.
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Purpose – The purpose of this paper is to examine the potential impact of the 2008 economic crisis on foreign direct investment (FDI), especially in the new member states of the European Union. Particular attention is paid to the... more
Purpose – The purpose of this paper is to examine the potential impact of the 2008 economic crisis on foreign direct investment (FDI), especially in the new member states of the European Union. Particular attention is paid to the activities of subsidiaries of multinational enterprises (MNE), which can follow different scenarios as a response to the crisis, including a reorganisation of their production systems, and a reduction or closure of activities.
Design/methodology/approach – The analysis is grounded on various streams of literature, including international business studies and research on transition. Evidence is derived from UNCTAD data, interviews and desk research. The method of descriptive analysis has been followed, combined with theoretical insights, conceptual discussions and case study evidence.
Findings – While the full magnitude and consequences of the crisis are yet to be extensively analysed, the authors' preliminary findings suggest that the response of MNE subsidiaries to the crisis hinges critically upon the type and the industry of such subsidiaries. Export platforms in automotive industries have been hardest hit. However, there are indications of the qualitative development of subsidiaries in other industries, despite the crisis, as well as growing attractiveness of new EU members FDI in services.
Research limitations/implications – This paper is an explorative study on the impact of the crisis on subsidiaries. More academic research should be conducted to understand this phenomenon, especially when the full magnitude of the crisis can be assessed.
Practical implications – The authors' analysis points at important policy implications. The authors challenge the view that rising economic nationalism would be the right answer to the problems created by corporate restructurings. Further, the authors advocate selective host government support to subsidiaries, especially aimed at retaining R&D departments and skilled workforce.
Originality/value – So far, the global economic crisis has been analysed mostly in consultancy reports and in studies focusing on the macroeconomic impact. However, to the authors' knowledge, no academic study has examined the issue of MNE subsidiaries' responses to the crisis.
Design/methodology/approach – The analysis is grounded on various streams of literature, including international business studies and research on transition. Evidence is derived from UNCTAD data, interviews and desk research. The method of descriptive analysis has been followed, combined with theoretical insights, conceptual discussions and case study evidence.
Findings – While the full magnitude and consequences of the crisis are yet to be extensively analysed, the authors' preliminary findings suggest that the response of MNE subsidiaries to the crisis hinges critically upon the type and the industry of such subsidiaries. Export platforms in automotive industries have been hardest hit. However, there are indications of the qualitative development of subsidiaries in other industries, despite the crisis, as well as growing attractiveness of new EU members FDI in services.
Research limitations/implications – This paper is an explorative study on the impact of the crisis on subsidiaries. More academic research should be conducted to understand this phenomenon, especially when the full magnitude of the crisis can be assessed.
Practical implications – The authors' analysis points at important policy implications. The authors challenge the view that rising economic nationalism would be the right answer to the problems created by corporate restructurings. Further, the authors advocate selective host government support to subsidiaries, especially aimed at retaining R&D departments and skilled workforce.
Originality/value – So far, the global economic crisis has been analysed mostly in consultancy reports and in studies focusing on the macroeconomic impact. However, to the authors' knowledge, no academic study has examined the issue of MNE subsidiaries' responses to the crisis.
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Research Interests: Hungary and Outward FDI
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This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is diffferent from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and... more
This article analyses indirect FDI, denoting investment projects, in which the ultimate owner is diffferent from the immediate investor. Reasons for the existence of this type of investment projects can be mostly corporate strategies and tax considerations. The development impact of indirect FDI is not necessarily negative; however it varies by the key types of indirect FDI (delegation of power to regional headquarters, nearshoring, concealed investment, and round tripping). It also depends on how the project money is transhipped: through an afff.iliate abroad, or through a special purpose entity. Government polices may influence largely the extent and development impact of indirect FDI, especially through tax policies. The phenomenon deserves more attention in the future, as currently indirect FDI is an under-researched topic.
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This paper explores the main features of outward foreign direct investment by Russian transnational corporations – referred to as ‘eagle multinationals’ in the literature – and some of the implications of their recent rise to global... more
This paper explores the main features of outward foreign direct investment by Russian transnational corporations – referred to as ‘eagle multinationals’ in the literature – and some of the implications of their recent rise to global prominence (since the 1990s) for the paradigms of international investment. Surprisingly, lower middle-income Russia is already a net capital exporter, and some of its firms, to mention Gazprom, Lukoil, Mechel, Norilsk Nickel and Severstal, for example, have already leapfrogged to a global status. The paper aims also at identifying issues for further analysis, such as the growing role of the State in controlling natural-resource based firms and its implications for the future of the Russian transnationals. This paper suggests that different investment paradigms fare divergently when applied to explain outward FDI from the Russian Federation. For example, the eclectic paradigm could be extended to Russian transnationals with some extension on home-country factors. Other theories, however, would require more radical re-thinking in future research.
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This article attempts to apply the flying geese metaphor to emerging foreign direct investment (FDI) patterns in Europe and the Mediterranean. Such a division of labour is at best at a nascent stage, given the overwhelming share of... more
This article attempts to apply the flying geese metaphor to emerging foreign direct investment (FDI) patterns in Europe and the Mediterranean. Such a division of labour is at best at a nascent stage, given the overwhelming share of Western Europe in both inward and outward foreign direct investment flows. Because of these imbalances, special attention is to be paid to Central and Eastern Europe’s (CEE) potential, both in the group joining the European Union (EU) in 2004 and the rest of the subregion. For the former, middle-income countries, risks in investment promotion are related to uncertainty brought about by the transition to European Union’s acquis and an eventually too fast increase in production costs. Policy response to that requires a modernisation of both general and specific investment promotion policies, adjusted to the rules of the Union. For the rest of Central and Eastern Europe, the challenge is to adjust to the enlarged European Union and to improve the business and investment environment, in order to capture the foreign direct investment outflows of other European countries searching for optimum labour costs.
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Abstract: 2008 was marked by major changes in the world economy: the international integration based on money and capital markets fell into a deep crisis. This article examines how foreign direct investment-together with international... more
Abstract: 2008 was marked by major changes in the world economy: the international integration based on money and capital markets fell into a deep crisis. This article examines how foreign direct investment-together with international trade-can replace those money and capital markets in the role of integrator of the world economy. It does not aim to provide an all-encompassing overview of future developments; nevertheless it analyses in detail to what degree foreign direct investment meets the requirements of being a stable ...
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Abstract: Since the early 1990s, foreign direct investment has assumed a leading role in the provision of telecommunications services in developing countries. Host countries, having perceived telecommunications services as the backbone of... more
Abstract: Since the early 1990s, foreign direct investment has assumed a leading role in the provision of telecommunications services in developing countries. Host countries, having perceived telecommunications services as the backbone of a modern service economy, have deregulated their telecommunications industries and implemented privatization programmes open to foreign investors. Transnational firms, looking for survival in global competition, have responded to that opening up, making telecommunications one of the ...
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3. New Europe&#x27;s promise for life sciences Sergey Filippov and Kálmán Kalotay INTRODUCTION The life science industry has a significant ... com/Czech-biotech-report-1/. Damborský, J., Z. Prokop and M. Kostka... more
3. New Europe&#x27;s promise for life sciences Sergey Filippov and Kálmán Kalotay INTRODUCTION The life science industry has a significant ... com/Czech-biotech-report-1/. Damborský, J., Z. Prokop and M. Kostka (2006),&#x27;Perspectives: biotechnology in Czech Republic, the past ...
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In the enlarged European Union (EU) with 25 members, the free movement of capital, coupled with the free movement of goods and services should be a major direct attraction for both intra-EU and external foreign direct investment (FDI)... more
In the enlarged European Union (EU) with 25 members, the free movement of capital, coupled with the free movement of goods and services should be a major direct attraction for both intra-EU and external foreign direct investment (FDI) inflows. EU membership does not, however, lead to a linear increase in FDI inflows as many analysts suggest (ECE, 2001). With EU accession, the structure of FDI may change substantially (Hunya, 2000; Dyker, 2001). Activities based on the existence of closed domestic markets (eg food and ...
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Abstract: In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region&#x27;s reintegration into the world economy, especially when compared to trade liberalization in... more
Abstract: In Central and Eastern Europe, outward foreign direct investment was not yet until recently a prominent factor in the region&#x27;s reintegration into the world economy, especially when compared to trade liberalization in the early 1990s or inward foreign direct ...
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Since the late 1990s, the Czech Republic, Hungary and Poland have emerged as a relatively important European research and development platform for foreign investors. Investors started targeting Hungary first, followed by Poland and the... more
Since the late 1990s, the Czech Republic, Hungary and Poland have emerged as a relatively important European research and development platform for foreign investors. Investors started targeting Hungary first, followed by Poland and the Czech Republic soon after. Firms operating in the automotive and electronics industries, in their majority originating from Europe, have the highest tendency to locate research and development in these three countries. With accession to the European Union, specialization of the Czech Republic, Hungary and Poland on research and development is expected to be strengthened. The expansion of laboratories, however, may face demographical limits. Compared to China and India, the population of these countries is small and is no longer growing. That may determine the size of projects they can attract in the future.
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Based on the analysis of the case of the Hungarian oil and gas firm MOL, target of a hostile takeover bid first by Austria’s OMV (2007), then by Russia’s Surgutneftegaz (2009), this essay attempts to show how such hostile takeover bids in... more
Based on the analysis of the case of the Hungarian oil and gas firm MOL, target of a hostile takeover bid first by Austria’s OMV (2007), then by Russia’s Surgutneftegaz (2009), this essay attempts to show how such hostile takeover bids in an industry (energy) deemed strategic by the host country contribute to the revival of political considerations related to foreign direct investment. It is argued that, although sensitivities to Russian investors may be limited to certain parts of the world where countries have to cope with a difficult historical heritage, the case of Hungary is not isolated. Other countries can show other types of sensitivities, leading to a similar result. Hence politics in foreign direct investment needs to be a major theme for future research. It is also emphasized that politics is not equal to protectionism. Indeed, some political intervention into investment may be more, and not less, favourable to foreign investors.
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Bulgaria's and Romania's transition from central planning to market economy has been long and difficult. The lateness of their transformation made their entry into the European Union possible only three years later (in 2007) than the... more
Bulgaria's and Romania's transition from central planning to market economy has been long and difficult. The lateness of their transformation made their entry into the European Union possible only three years later (in 2007) than the other transition economy candidates for membership. The delayed transition and 'Europeanization' of Bulgaria and Romania have been reflected in the patterns of their inward foreign direct investment. Almost three quarters of these inflows accumulated since the beginning of transition have been attracted after the Thessaloniki Summit in 2003 which locked the date of their entry into the European Union. Moreover, there are questions surrounding the quality and the development impact of inbound foreign direct investment. Despite the major labour cost and corporate tax advantages of locations Bulgaria and Romania, these countries have attracted relatively few efficiency seeking projects, mostly in garments and footwear, an industry that may be under global competitive threat. Potentially, however, they could become the 'workbench' within the European Union for many other industries, too. In the near future, the main challenge of these low-income locations is how to ensure that their investment potential materializes. To arrive there, it is important to further improve the business environment (as a continuation of the impressive pre-accession efforts) by strengthening the judiciary system, fighting against corruption and in Bulgaria, against organized crime.
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This paper examines the potential impact of the economic crisis - started in 2008 - on the dynamics global foreign direct investment, especially in the new member states of the European Union. The global economic crisis that hit the world... more
This paper examines the potential impact of the economic crisis - started in 2008 - on the dynamics global foreign direct investment, especially in the new member states of the European Union. The global economic crisis that hit the world in 2008 has forced scholars and policy makers alike to rethink their approaches to the global economy, in particular to financial markets (including stock exchanges and portfolio investment). It can be hypothesised that the crisis has been particularly devastating because it has resulted from the coincidence of three factors: a cyclical downturn in the world economy; a structural change that hit certain industries which used to be star performers in the global economy (especially the automotive industry); and the collapse of the previous model of the financial industry based on excesses. This paper asks how this crisis affects foreign direct investment flows, with special attention being paid to the question of which locations are set to lose the least and which ones are set to lose the most. In this respect, particular attention is paid to the activities of subsidiaries of multinational enterprises. These subsidiaries can follow different scenarios as a response to the global economic turmoil, including a reorganization of their production systems, and a reduction or closure of activities that are deemed to be less necessary for the continuation of activities. Finally, the paper examines the policy implications of the crisis. It challenges the view that rising economic nationalism (in the form of protecting one location against locations in other countries) would be the right answer to the problems created by corporate restructurings.
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With its size and natural resources, the Russian Federation has the potential to attract all types of foreign direct investment (FDI) but, up until recently, has attracted FDI flows below that potential. This has been largely due to the... more
With its size and natural resources, the Russian Federation has the potential to attract all types of foreign direct investment (FDI) but, up until recently, has attracted FDI flows below that potential. This has been largely due to the influence of local capitalists (the oligarchs) blocking the sales of assets to foreign investors. Realizing the Russian Federation's potential for attracting FDI and sustaining investor interest will depend largely on whether or not foreign investors will be allowed to acquire equity shares in or even ownership of local firms. From this point of view, the recent weakening of the oligarchs has a double-edged impact: while it potentially removes one obstacle to inflows of FDI, it raises questions about ownership rights and respect of the principle of pacta sunt servanda. This article therefore analyses how and to what degree bilateral investment agreements signed by the Russian Federation and the country's entry into the World Trade Organization may provide the necessary guarantees for foreign investors.
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The Russian Federation is the second largest outward investing emerging economy, surpassed only by Hong Kong (China) but ahead of Brazil, China and India. This paper analyses the main patterns of Russian outward FDI, including its... more
The Russian Federation is the second largest outward investing emerging economy, surpassed only by Hong Kong (China) but ahead of Brazil, China and India. This paper analyses the main patterns of Russian outward FDI, including its dynamics and geographical destinations. It also highlights the changing strategies of outward investing Russian firms: in the early 1990s, they were mostly privately owned TNCs, seeking for ‘safety nests’ abroad to protect themselves from domestic uncertainty; these days, State-owned or -influenced TNCs dominate Russian capital exports, motivated by a desire to control the value chain of their products. There are however common characteristics between the two periods, such as the prevalence of natural-resource-based firms among the largest Russian TNCs. Based on those characteristics, the paper attempts to model formally Russian outward FDI. It tests the extent to which the mainstream theory (ownership and location advantages) is applicable to the Russian context, as well as the role played by specific factors such as State ownership. Home-country factors seem to play a particularly important role in shaping Russian outward FDI. As for the motivations of that FDI, Russian TNCs seem aim to control upstream natural resources in the CIS and developing countries, while in high-income countries they aim at controlling downstream markets.
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Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and... more
Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and unregistered in the balance of payments, or misregistered under other items. Since 2003, their recording has improved. However, the question remains: how can a lower-middle income country become a net capital exporter? It is supposed to be the combined result of economic and political factors such as the economic and business environment, still deemed to be difficult. The fact that the ‘oligarchy’ created under the presidency of Boris Yeltsin (1991-1999) continues to control large parts of the privatized natural resources of the country also stimulated capital exporting behavior. With the political changes currently taking place, only a limited increase in the influence of the State is expected to happen. Moreover, the strategic interest of Russian firms to control their vertical value chains through outward FDI is expected to remain in the longer term.
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The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from labor... more
The expansion of the European Union in 2004 to new members from beyond the former Iron Curtain could boost the competitiveness of firms located in the enlarged Union. The competitive advantage of new locations is derived from labor productivity, and not so from lower taxes and large transfers from the European Union budget as sometimes claimed. Compared to opportunities, the foreign direct investment inflows of the new members have been so far small and slow growing. Part of this performance may be due to the wrapping up of privatizations and the slow take-off of large greenfield projects in those countries. Part of the blame however goes to protectionist pressures in the old members of the Union, prompted by fears of massive relocation of economic activities to new members.
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This note seeks to challenge the view that Central Europe is a case of failure or deception in terms of its inward foreign direct investment performance. It argues that both absolute and relative foreign direct investment figures in... more
This note seeks to challenge the view that Central Europe is a
case of failure or deception in terms of its inward foreign direct
investment performance. It argues that both absolute and
relative foreign direct investment figures in themselves are
misleading in the evaluation of the performance of the region,
which is a latecomer as a host to such investment. Rather,
what should be examined is the region’s foreign direct
investment performance as compared with its potential. For
this purpose, the concept of “foreign direct investment
absorptive capacity” is introduced. As a first step towards the
measurement of absorptive capacity, findings based on
UNCTAD’s 1998 survey of Central European investment
promotion agencies are presented. The findings show that
Central Europe is somewhere halfway towards becoming a
foreign direct investment success story.
case of failure or deception in terms of its inward foreign direct
investment performance. It argues that both absolute and
relative foreign direct investment figures in themselves are
misleading in the evaluation of the performance of the region,
which is a latecomer as a host to such investment. Rather,
what should be examined is the region’s foreign direct
investment performance as compared with its potential. For
this purpose, the concept of “foreign direct investment
absorptive capacity” is introduced. As a first step towards the
measurement of absorptive capacity, findings based on
UNCTAD’s 1998 survey of Central European investment
promotion agencies are presented. The findings show that
Central Europe is somewhere halfway towards becoming a
foreign direct investment success story.
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This article explores the main features of outward foreign direct investment and transnational corporations from Russia since 1991. The universe of Russian transnational corporations shows a great variety in its ownership structures,... more
This article explores the main features of outward foreign direct investment and transnational corporations from Russia since 1991. The universe of Russian transnational corporations shows a great variety in its ownership structures, motivations and strategies to invest abroad. There are nevertheless to two common characteristics they share. The first one is their leapfrogging to the global scene, to mention Alrosa, Gazprom, Lukoil, Mechel, Norilsk Nickel, RusAl and Severstal as prime examples. The other common characteristic of the Russian transnational corporations is their strong link with the natural resources of their home country. Until recently, they were all based on oil and gas, metallurgy, mining or related activities. The article aims also at identifying issues for further analysis, such as the growing role of the State in controlling natural resources-based firms and its implications for the future of Russian transnational corporations.
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As measured by gains in their shares in international exports over the period 1985 to 2000, Hungary, the Czech Republic and Poland have successfully become export platforms for investors. The performance of other countries in Central and... more
As measured by gains in their shares in international exports over the period 1985 to 2000, Hungary, the Czech Republic and Poland have successfully become export platforms for investors. The performance of other countries in Central and Eastern Europe has lagged behind in this respect. This article offers an empirical investigation into the reasons for this divergent performance, including an examination of the various strategies adopted by CEE countries to develop their export industries during their transition to market economies and the effects of those strategies. Central and Eastern Europe, when compared with other regions, has specialized its export-oriented FDI on selected, knowledge-intensive industries and activities, serving mostly the western European market. This is so because the countries of CEE cannot and should not compete with the scale of production and wage levels of East Asian locations. An additional handicap of CEE is the relatively nascent stage of the private sector, which further increases the reliance on FDI as a source of market access, technology and capital under the specific conditions of transition from centrally planned to market economies. This FDI in turn can benefit from the favourable geographical location of many of the CEE countries (close to western Europe) and their relatively well-trained labour force.
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The role of outward FDI in transition economies is generally less well known and less understood than that of inward FDI. This so not only because the latter is larger in volume but also because the links of the former with restructuring... more
The role of outward FDI in transition economies is generally less well known and less understood than that of inward FDI. This so not only because the latter is larger in volume but also because the links of the former with restructuring are less well established and explained. Outward FDI, however, is gaining importance over time, and there is a need to have a closer look at its evolution and its relationship with government policies. This article analyses the examples of three transition economies: the Russian Federation, Hungary and Slovenia, and concludes that the financial resource element of outward FDI is generally less important than its components linked to international integration and competitiveness. Although capital account liberalization will not stop capital outflows if the underlying causes are not addressed properly, it can ensure a smooth and transparent transition towards capital exports.
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In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region’s reintegration into the world economy as trade liberalisation used to be in the early 1990s or inward foreign... more
In Central and Eastern Europe, outward foreign direct investment (FDI) has not yet become as a prominent factor in the region’s reintegration into the world economy as trade liberalisation used to be in the early 1990s or inward foreign direct investment is currently. In the terminology of the investment–development path, with the notable exception of the Russian Federation, the region is in stage 2, whereby inward flows are still growing faster than outward flows. This article argues that a combination of the latecomer status of the region’s transnational corporations and the transition shock can explain most of that laggard situation. It hypothesises that the enlargement of the European Union (EU) would give a major push to the outward foreign direct investment flows of Central and Eastern Europe (CEE), on condition that adequate government policies to promote those investments are put in place. The impact on the investment–development path, however, is uncertain, because accession to the EU is often accompanied by a surge in foreign direct investment inflows, too. Finally, the article also looks at the options available to deal with the specific problems of the Russian Federation in relation to capital flight, including ways of regularisation and potential return to the home economy.
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Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and... more
Since the beginning of the transition from centrally planned to market economy, the FDI outflows of the Russian Federation have consistently exceeded the inflows. In the 1990s, most of the outflows were of an informal nature, and unregistered in the balance of payments, or misregistered under other items. Since 2003, their recording has improved. However, the question remains: how can a lower-middle income country become a net capital exporter? It is supposed to be the combined result of economic and political factors such as the economic and business environment, still deemed to be difficult. The fact that the ‘oligarchy’ created under the presidency of Boris Yeltsin (1991-1999) continues to control large parts of the privatized natural resources of the country also stimulated capital exporting behavior. With the political changes currently taking place, only a limited increase in the influence of the State is expected to happen. Moreover, the strategic interest of Russian firms to control their vertical value chains through outward FDI is expected to remain in the longer term.
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By its very nature, the systemic impact of privatization through foreign direct investment (FDI) has been unique because it has been part of the transition of Central and Eastern Europe from centrally planned to market economies without... more
By its very nature, the systemic impact of privatization through foreign direct investment (FDI) has been unique because it has been part of the transition of Central and Eastern Europe from centrally planned to market economies without historical parallel. On balance, this impact has been positive, and more substantial than was expected at the beginning of the transition process. At the early phases of systemic transformation, the majority of the observers believed that Central and Eastern European countries only needed a formal change in ownership without major qualitative upheaval, and perhaps a dose of macroeconomic stabilization. This led them to conclude that FDI would not need to play a major role in transformation, which would instead be led by a nascent domestic private sector. As a corollary, they believed that FDI needed to be confined to its greenfield type, and was to be avoided in the privatization process. However, with some exceptions most Central and Eastern European economics had been lacking in private business and experience with markets for at least half a century. In retrospect, it is easy to deduct that the rapid switch from public to private ownership would not have been possible without the active involvement of foreign private investment, given the lack of experience and capital available locally. The transition from centrally planned to market economies involved not only an increased role for private enterprise and markets but also the elimination of the inefficiencies inherent in social ownership and planning and the restructuring of the production base and its integration into the international economy. Privatization related FDI has also contributed to the elimination of such macroeconomic and structural distortions inherited from the socialist economies as high degrees of shortages and slacks, soft budget constraints, price distortions and latent inflationary pressures.
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(2003) Kalotay. Journal for East European Management Studies. Read by researchers in: 100% Social Sciences. They are barely visible on the global scene. But it is in part so because official statistics have difficulties in reflecting... more
(2003) Kalotay. Journal for East European Management Studies. Read by researchers in: 100% Social Sciences. They are barely visible on the global scene. But it is in part so because official statistics have difficulties in reflecting their real size. They are nevertheless gaining in importance ...