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

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  • Slavo Radosevic

    ()
    (School of Slavonic and East European Studies, University College London)

  • Andrew Roziek

    (School of Slavonic and East European Studies, University College London)

Abstract

This paper reviews and explores the major effects of the 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 the 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) couple 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 the 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.

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File URL: http://www.ssees.ucl.ac.uk/publications/working_papers/wp53.pdf
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Bibliographic Info

Paper provided by CENTRE FOR THE STUDY OF ECONOMIC AND SOCIAL CHANGE IN EUROPE,School of Slavonic and East European Studies,University College London (SSEES,UCL) in its series Working Papers with number 53.

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Length: 41 pages
Date of creation: Mar 2005
Date of revision:
Handle: RePEc:see:wpaper:53

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Cited by:
  1. 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.
  2. 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.

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