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Multinational enterprise strategy, foreign direct investment and economic development: the case of the Hungarian banking industry

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  • Akbar, Yusaf H.
  • McBride, J. Brad

Abstract

This paper examines foreign direct investment (FDI) in the Hungarian economy in the period of post-Communist transition since 1989. Hungary took a quite aggressive approach in welcoming foreign investment during this period and as a result had the highest per capita FDI in the region as of 2001. We discuss the impact of FDI in terms of strategic intent, i.e., market serving and resource seeking FDI. The effect of these two kinds of FDI is contrasted by examining the impact of resource seeking FDI in manufacturing sectors and market serving FDI in service industries. In the case of transition economies, we argue that due to the strategic intent, resource seeking FDI can imply a short-term impact on economic development whereas market serving FDI strategically implies a long-term presence with increased benefits for the economic development of a transition economy. Our focus is that of market serving FDI in the Hungarian banking sector, which has brought improved service and products to multinational and Hungarian firms. This has been accompanied by the introduction of innovative financial products to the Hungarian consumer, in particular consumer credit including mortgage financing. However, the latter remains an underserved segment with much growth potential. For public policy in Hungary and other transition economies, we conclude that policymakers should consider the strategic intent of FDI in order to maximize its benefits in their economies.

Suggested Citation

  • Akbar, Yusaf H. & McBride, J. Brad, 2004. "Multinational enterprise strategy, foreign direct investment and economic development: the case of the Hungarian banking industry," Journal of World Business, Elsevier, vol. 39(1), pages 89-105, February.
  • Handle: RePEc:eee:worbus:v:39:y:2004:i:1:p:89-105
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    References listed on IDEAS

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    1. S Estrin & P Hare & M Suranyi, 1992. "Banking in Transition: Development and Current Problems in Hungary," CEP Discussion Papers dp0068, Centre for Economic Performance, LSE.
    2. Cludia M. Buch, 1997. "Opening up for foreign banks: How Central and Eastern Europe can benefit," The Economics of Transition, The European Bank for Reconstruction and Development, vol. 5(2), pages 339-366, November.
    3. John P. Bonin & Istvan Abel, 2000. "Retail Banking in Hungary: A Foreign Affair?," William Davidson Institute Working Papers Series 356, William Davidson Institute at the University of Michigan.
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    Cited by:

    1. Barnard, H. & Cowan, R. & Müller, M., 2012. "Global excellence at the expense of local diffusion, or a bridge between two worlds? Research in science and technology in the developing world," Research Policy, Elsevier, vol. 41(4), pages 756-769.
    2. Dörrenbächer, Christoph & Gammelgaard, Jens, 2010. "Multinational corporations, inter-organizational networks and subsidiary charter removals," Journal of World Business, Elsevier, vol. 45(3), pages 206-216, July.
    3. Barnard, Helena, 2008. "Uneven domestic knowledge bases and the success of foreign firms in the USA," Research Policy, Elsevier, vol. 37(10), pages 1674-1683, December.
    4. Fernandes, Ana M. & Paunov, Caroline, 2008. "Foreign direct investment in services and manufacturing productivity growth: evidence for Chile," Policy Research Working Paper Series 4730, The World Bank.
    5. repec:spr:manint:v:48:y:2008:i:4:d:10.1007_s11575-008-0022-z is not listed on IDEAS
    6. Dimitratos, Pavlos & Liouka, Ioanna & Young, Stephen, 2009. "Regional location of multinational corporation subsidiaries and economic development contribution: Evidence from the UK," Journal of World Business, Elsevier, vol. 44(2), pages 180-191, April.
    7. Petrou, Andreas, 2007. "Multinational banks from developing versus developed countries: Competing in the same arena?," Journal of International Management, Elsevier, vol. 13(3), pages 376-397, September.
    8. Cazzavillan, Guido & Olszewski, Krzysztof, 2012. "Interaction between foreign financial services and foreign direct investment in Transition Economies: An empirical analysis with focus on the manufacturing sector," Research in Economics, Elsevier, pages 305-319.
    9. Aleksander Rutkowski, 2006. "Inward FDI and Financial Constraints in Central and East European Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(5), pages 28-60, October.
    10. Aleksander Rutkowski, 2006. "Inward FDI and Financial Constraints in Central and East European Countries," Emerging Markets Finance and Trade, Taylor & Francis Journals, vol. 42(5), pages 28-60, October.
    11. Aimei Hong & Changchun Cheng, 2016. "The study on affecting factors of regional marine industrial structure upgrading," International Journal of System Assurance Engineering and Management, Springer;The Society for Reliability, Engineering Quality and Operations Management (SREQOM),India, and Division of Operation and Maintenance, Lulea University of Technology, Sweden, vol. 7(2), pages 213-219, June.
    12. Barnard, Helena & Cowan, Robin & Muller, Moritz, 2010. "Global excellence at the expense of local relevance, or a bridge between two worlds? Research in science and technology in the developing world," MERIT Working Papers 051, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
    13. Lee, Joong-Woo & Song, Hong Sun & Kwak, Jooyoung, 2014. "Internationalization of Korean banks during crises: The network view of learning and commitment," International Business Review, Elsevier, vol. 23(6), pages 1040-1048.

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