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Foreign Direct Investment and Restructuring in the Automotive Industry in Central and East Europe

Author

Listed:
  • Slavo Radosevic

    (UCL School of Slavonic and East European Studies)

  • Andrew Roziek

    (UCL School of Slavonic and East European Studies)

Abstract

This paper reviews and explores the major effects of FDI on industry restructuring of the CEE automotive industry. In particular, we are interested if automotive companies have exploited the value creation potential of CEE? Which factors explain the scale and depth of automotive industry restructuring in CEE? What are the economic effects of restructuring the automotive industry in terms of employment, trade and technology? What has been the role of national and EU policies in shaping FDI and restructuring in the CEE automotive industry? Our results suggest that the value creation potential of CEE as a global automotive location has not yet been fully exploited with great differences across countries. A combination of country specific factors (proximity to EU markets, socialist heritage in automotive industry, skilled labour and privatisation policies) coupled with strategies of automotive MNCs have generated different country patterns and very different effects on industry. Improvements in productivity and technology transfer in both embodied (equipment upgrading) and disembodied form (know how) are significant in countries with large FDI in automotive industry. Employment effects are positive in particular in automotive suppliers industry. Privatisation policy in early 1990s which was followed by a policy of attracting Greenfield FDI on the eve of EU accession is crucial in explaining country differences in FDI presence. Automotive investors have foreseen EU accession and in that respect, EU membership will not bring to changes in trend but possibly a deepening of the automotive cluster in central Europe. However, whether this will happen or not will depend on the ability of CEECs to develop sector specific policies which would support the upgrading of local automotive suppliers.

Suggested Citation

  • Slavo Radosevic & Andrew Roziek, 2005. "Foreign Direct Investment and Restructuring in the Automotive Industry in Central and East Europe," UCL SSEES Economics and Business working paper series 53, UCL School of Slavonic and East European Studies (SSEES).
    • Handle: RePEc:see:wpaper:53
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    2. Bolesław Domański & Krzysztof Gwosdz, 2009. "Toward a More Embedded Production System? Automotive Supply Networks and Localized Capabilities in Poland," Growth and Change, Wiley Blackwell, vol. 40(3), pages 452-482, September.
    3. Filippov, Sergey & Kalotay, Kalman, 2009. "Foreign Direct Investment in Times of Global Economic Crisis: Spotlight on New Europe," MERIT Working Papers 2009-021, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    4. Fung , K.C. & Korhonen, Iikka & Li, Ke & Ng, Francis, 2008. "China and central and eastern European countries : regional networks, global supply chain, or international competitors?," Policy Research Working Paper Series 4689, The World Bank.
    5. Norhanishah Mohamad Yunus, 2021. "The Technology and Knowledge Spillover Effects of FDI on Labour Productivity," GATR Journals jber199, Global Academy of Training and Research (GATR) Enterprise.
    6. 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.
    7. Viktor Koval & Ganna Duginets & Oksana Plekhanova & Andrii Antonov & Mariana Petrova, 2019. "On the supranational and national level of global value chain management," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 6(4), pages 1922-1937, June.
    8. Andrea Szalavetz, 2010. "The Hungarian automotive sector - a comparative CEE perspective with special emphasis on structural change," EIIW Discussion paper disbei182, Universitätsbibliothek Wuppertal, University Library.
    9. Aysan, Ahmet Faruk & Hacihasanoglu, Yavuz Selim, 2007. "The Competitiveness of Turkey with Respect to the Slovak Republic for the 1995-1999 Period," MPRA Paper 5496, University Library of Munich, Germany.
    10. Richard Pomfret & Patricia Sourdin, 2016. "Trade between Australia and the EU, 1990 - 2015," School of Economics and Public Policy Working Papers 2016-10, University of Adelaide, School of Economics and Public Policy.
    11. Kristóf Gyódi, 2014. "The Impact of FDI on Bilateral Exports: The Case of the Automotive Industry in the Visegrad Countries," Ekonomia journal, Faculty of Economic Sciences, University of Warsaw, vol. 37.
    12. Mislav Brkic, 2016. "Greek Sovereign Debt Crisis: Causes, Fiscal Adjustment Programs and Lessons for Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 18(1), pages 71-99, June.
    13. Malgorzata Jakubiak & Peter Kolesar & Ivailo Izvorski & Lucia Kurekova, 2008. "The Automotive Industry in the Slovak Republic," World Bank Publications - Books, The World Bank Group, number 28010, December.
    14. Grzegorz Micek & Robert Guzik & Krzysztof Gwosdz & Bolesław Domański, 2021. "Newcomers from the Periphery: The International Expansion of Polish Automotive Companies," Energies, MDPI, vol. 14(9), pages 1-18, May.
    15. Fung , K.C. & Korhonen, Iikka & Li, Ke & Ng, Francis, 2008. "China and central and eastern European countries : regional networks, global supply chain, or international competitors?," Policy Research Working Paper Series 4689, The World Bank.
    16. János Rechnitzer & Róbert Hausmann & Tamás Tóth, 2017. "Insight into the Hungarian Automotive Industry in International Comparison," Financial and Economic Review, Magyar Nemzeti Bank (Central Bank of Hungary), vol. 16(1), pages 119-142.
    17. Dimitris Giakoulas, 2021. "Trends and Patterns of Greek Outward FDI in CEE Countries," International Journal of Business and Economic Sciences Applied Research (IJBESAR), International Hellenic University (IHU), Kavala Campus, Greece (formerly Eastern Macedonia and Thrace Institute of Technology - EMaTTech), vol. 14(2), pages 14-28, September.

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