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

Author

Listed:
  • 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.

Suggested Citation

  • Jože P. Damijan & Matija Rojec, 2007. "Foreign Direct Investment and Catching Up of New EU Member States: Is There a Flying Geese Pattern?," Applied Economics Quarterly (formerly: Konjunkturpolitik), Duncker & Humblot, Berlin, vol. 53(2), pages 91-118.
  • Handle: RePEc:aeq:aeqaeq:v53_y2007_i2_q2_p91-118
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    Citations

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    Cited by:

    1. 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.
    2. Jože Damijan & Črt Kostevc & Matija Rojec, 2013. "Global Supply Chains at Work in Central and Eastern European Countries: Impact of FDI on export restructuring and productivity growth," LICOS Discussion Papers 33213, LICOS - Centre for Institutions and Economic Performance, KU Leuven.
    3. Ramona Jimborean & Anna Kelber, 2017. "Foreign Direct Investment Drivers and Growth in Central and Eastern Europe in the Aftermath of the 2007 Global Financial Crisis," Comparative Economic Studies, Palgrave Macmillan;Association for Comparative Economic Studies, vol. 59(1), pages 23-54, March.
    4. repec:rej:journl:v:16:y:2013:i:47:p:17-28 is not listed on IDEAS
    5. Petri, Peter A., 2012. "The determinants of bilateral FDI: Is Asia different?," Journal of Asian Economics, Elsevier, vol. 23(3), pages 201-209.
    6. Bijun Wang & Yuyan Tan & Miaojie Yu & Yiping Huang, 2016. "Special Section: China's Growing Trade and its Role to the World Economy," Pacific Economic Review, Wiley Blackwell, vol. 21(1), pages 72-83, February.
    7. repec:rej:journl:v:19:y:2016:i:61:p:95-122 is not listed on IDEAS
    8. Jarko Fidrmuc & Reiner Martin, 2011. "Capital Inflows, Exports and Growth in the CESEE Region," Chapters,in: Post-Crisis Growth and Integration in Europe, chapter 21 Edward Elgar Publishing.
    9. Jože Damijan & Črt Kostevc & Matija Rojec, 2015. "Bright past, shady future? Past and potential future export performance of CEE countries in a comparative perspective," Post-Communist Economies, Taylor & Francis Journals, vol. 27(3), pages 306-335, September.
    10. 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.
    11. Jože Damijan & Črt Kostevc & Matija Rojec, "undated". "FDI, structural change and productivity growth: global supply chains at work in Central and Eastern European countries," IRMO Occasional Papers 3, Institute for Development and International Relations, Zagreb.
    12. Grigor Stoevsky, 2015. "Exports and foreign direct investment as factors for economic growth in the EU New Member States," Economic Thought journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 2, pages 92-111,112-.
    13. Leitão, Nuno Carlos, 2012. "The impact of trade on economic growth," MPRA Paper 37425, University Library of Munich, Germany.
    14. 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.
    15. Grigor Stoevsky, 2014. "Dependencies between Labour Productivity, Export and FDI in the New EU Member Countries (cointegration analysis at sector and macroeconomic level)," Economic Studies journal, Bulgarian Academy of Sciences - Economic Research Institute, issue 4, pages 15-42.
    16. repec:eco:journ2:2017-05-19 is not listed on IDEAS

    More about this item

    Keywords

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

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology

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