Functional and Sectoral Division of Labour within Central and Eastern European Countries: Evidence from Greenfield FDI

Abstract

Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractIn this paper, we analyse the sectoral and functional division of labour in Central and Eastern European (CEE) regions within the convergence debate. By analysing the investment decisions of multinational corporations in 49 NUTS-2 regions across 6 European CEE countries (Poland, Czech Republic, Slovakia, Hungary, Romania, and Bulgaria), we show that capital city regions not only receive more greenfield FDI but also attract a larger variety of investments in terms of sectors and functions. Capital cities are more likely to host higher-end sectors and functions, which provides an explanation for the existing regional disparities within CEE countries. These results highlight the importance of functional and sectoral divisions of labour in the view of regional profiling and contribute to the recent EU Cohesion Policy debate.

Sources of productivity differentials in manufacturing in post-transition urban South-East Europe

“…Furthermore, the attraction forces of metropolises have drawn in foreign investors, enabling capital cities to strengthen their position within the national urban hierarchy. Dogaru et al (2014) have found that capital city regions in transitional Europe have received more greenfield FDIs and attracted a wider variety of investments, both in terms of sectors and functions. Largely, these findings would imply that "core" locations at the national level are better integrated through trade and capital flows than the rest of the urban areas in European transitional countries.…”

“…Moreover, capital cities are the main location for headquarters of large firms and investors. Data on foreign investment inflows in transition economies mostly show that capital cities (or capital city/metropolitan regions) attract the bulk share of capital flows due to their superior business infrastructure and concentration of resources (Lintz et al, 2007;Dogaru et al, 2014). For these reasons a robustness check is performed by excluding manufacturing firms located in capital cities from the sample.…”

Intensity of foreign investment promotion and development levels in Central–Eastern European regions

“…Yet, despite wide-ranging locational advantages suited to diverse industry branches and the increasing flows of FDI, in the first half of the 2000s Central–Eastern European Countries [1] (CEEC) were attracting a mere fraction of cross-border investments conducted by multinational enterprises (MNEs) (UNCTAD, 2007; Dogaru et al , 2015; Ascani et al , 2017). Arguably, beyond the wider exogenous and geopolitical factors, this could be partially attributed to regional authorities' limited engagement in, and poor execution of promotion aimed at investment attraction.…”

“…The Czech Republic, Poland and Slovakia began emerging on the global map of FDI destinations only since the beginning of 1990s. As relative newcomers, from the outset they had to compete with established Western European destinations, with themselves and other locations in the neighbouring countries, Asia and Latin America (Helinska-Hughes and Hughes, 2003; Dogaru et al , 2015). Additionally, accession to the EU in May 2004 and the implementation of its acquis communautaire levelled the playing field and strengthened the competition between them.…”

“…Despite recognised shortcomings in MNEs’ developmental impacts, including limited local embeddedness and multiplier effects, as well as crowding out of local businesses (Bradshaw, 2005; Pavlínek, 2004; Capik and Drahokoupil, 2011; Dogaru et al , 2015), the continued interest from the regional authorities in attracting operations of foreign companies is underpinned by two complementing sets of factors. Firstly, as widely debated in the literature, the prospects of benefiting from their expertise, technology, capital and created employment (Dunning and Lundan, 2008; Bonetti and Masiello, 2014; Ascani et al , 2017).…”