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Foreign Direct Investment and Catching Up of New EU Member States: Is There a Flying Geese Pattern?

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  • Jože P. Damijan
  • Matija Rojec

Abstract

The paper verifies the existence of the Flying Geese Model (FGM) in the case of inward FDI in Central European Countries (CECs) which entered the EU, in what way and to what extent FDI has contributed to the catching up, i.e. to the restructuring process and productivity growth in CECs manufacturing. The analysis shows that FDI is a very important vehicle of manufacturing sector restructuring and productivity growth in CECs, along the lines of FGM. Foreign investment enterprises are increasingly engaged in high and medium-high tech industries, much more than domestic enterprises. Also, productivity growth in CEC manufacturing is generally positively correlated with foreign penetration. However, high foreign penetration has a negative impact on productivity growth in high and medium-high tech industries. This is because foreign investment enterprises are mostly engaged in lower end technological segments of these industries and will only change when domestic absorption capacity of CECs will upgrade. At the existing stage of development in CECs, the catching up process via FDI, thus, takes place predominantly in industries at the middle of the technological intensity spectrum.

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Bibliographic Info

Article provided by Duncker & Humblot, Berlin in its journal Applied Economics Quarterly.

Volume (Year): 53 (2007)
Issue (Month): 2 ()
Pages: 91-118

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Handle: RePEc:aeq:aeqaeq:v53_y2007_i2_q2_p91-118

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Related research

Keywords: foreign direct investment; flying geese model; catching-up process; new EU member states; restructuring of manufacturing industry; productivity growth; technological intensity;

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Cited by:
  1. Leitão, Nuno Carlos, 2012. "The impact of trade on economic growth," MPRA Paper 37425, University Library of Munich, Germany.
  2. repec:rej:journl:v:16:y:2013:i:47:p:17-28 is not listed on IDEAS
  3. Jarko Fidrmuc & Reiner Martin, 2011. "FDI, Trade and Growth in CESEE Countries," Focus on European Economic Integration, Oesterreichische Nationalbank (Austrian Central Bank), issue 1, pages 70-89,112-1.
  4. Peter A. Petri, 2010. "The Determinants of Bilateral FDI: Is Asia Different?," Working Papers 12, Brandeis University, Department of Economics and International Businesss School.
  5. Lefilleur, Julien & Maurel, Mathilde, 2010. "Inter- and intra-industry linkages as a determinant of FDI in Central and Eastern Europe," Economic Systems, Elsevier, vol. 34(3), pages 309-330, September.
  6. Nuno Carlos LEITÃO, 2012. "ECONOMIC gROWTH, GLOBALIZATION AND TRADE," Management Research and Practice, Research Centre in Public Administration and Public Services, Bucharest, Romania, vol. 4(3), pages 18-24, September.

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