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The Influence of Foreign Direct Investments on Regional Development in Croatia

Author

Listed:
  • Ines Kersan-Skabic

    () (Full Professor at the Juraj Dobrila University of Pula, Faculty of Economics and Tourism “Dr. Mijo Mirkovic”, Croatia)

  • Lela Tijanic

    () (Postdoctoral researcher at the Juraj Dobrila University of Pula, Faculty of Economics and Tourism “Dr. Mijo Mirkovic”, Croatia)

Abstract

The aim of this study was to determine the influence of foreign direct investments (FDI) on regional development in Croatia and to contribute to previous studies that deal with regional FDI re-allocations. Our analysis was conducted at the NUTS 3 level (21 Croatian counties) and applied panel data analysis to determine the influence of FDI as well as other factors that proved to be significant in regional development in Croatia. The results point out that investment (i.e., both domestic and foreign direct investments), labor productivity, and export have a positive and significant influence on regional development, while absorptive capacity has a negative influence. It is therefore important to strengthen the absorptive capacity of Croatian regions to create a favorable investment environment and to provide good preconditions for the development of other factors of regional development. Findings are relevant for policy makers who should take more proactive roles in attracting FDI as a way of strengthening regional development in Croatia. This may help policy-makers to act locally to achieve cohesion, but it can also be important for foreign investors that observe regional FDI determinants in the European Union.

Suggested Citation

  • Ines Kersan-Skabic & Lela Tijanic, 2014. "The Influence of Foreign Direct Investments on Regional Development in Croatia," Croatian Economic Survey, The Institute of Economics, Zagreb, vol. 16(2), pages 59-90, December.
  • Handle: RePEc:iez:survey:ces-v16_12-2014_kersan-skabic-tijanic
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    References listed on IDEAS

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    1. Martin Bijsterbosch & Marcin Kolasa, 2010. "FDI and productivity convergence in Central and Eastern Europe: an industry-level investigation," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 145(4), pages 689-712, January.
    2. Luiz R. de Mello Jr., 1997. "Foreign Direct Investment in Developing Countries: A Selective Survey," Studies in Economics 9701, School of Economics, University of Kent.
    3. Nuno Crespo & Maria Paula Fontoura & Isabel Proença, 2009. "FDI spillovers at regional level: Evidence from Portugal," Papers in Regional Science, Wiley Blackwell, vol. 88(3), pages 591-607, August.
    4. John K. Mullen & Martin Williams, 2005. "Foreign Direct Investment and Regional Economic Performance," Kyklos, Wiley Blackwell, vol. 58(2), pages 265-282, April.
    5. Lessmann, Christian, 2013. "Foreign direct investment and regional inequality: A panel data analysis," China Economic Review, Elsevier, vol. 24(C), pages 129-149.
    6. 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.
    7. Vassilis MONASTIRIOTIS & Jacob A. JORDAAN, 2010. "Does FDI promote regional development? Evidence from local and regional productivity spillovers in Greece," Eastern Journal of European Studies, Centre for European Studies, Alexandru Ioan Cuza University, vol. 1, pages 139-164, December.
    8. Timothy C. Ford & Jonathan C. Rork & Bruce T. Elmslie, 2008. "Considering The Source: Does The Country Of Origin Of Fdi Matter To Economic Growth?," Journal of Regional Science, Wiley Blackwell, vol. 48(2), pages 329-357.
    9. Luiz de Mello, 1997. "Foreign direct investment in developing countries and growth: A selective survey," Journal of Development Studies, Taylor & Francis Journals, vol. 34(1), pages 1-34.
    10. David Moore & Athanasios Vamvakidis, 2007. "Economic Growth in Croatia; Potential and Constraints," IMF Working Papers 07/198, International Monetary Fund.
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    More about this item

    Keywords

    FDI; regional development; absorptive capacity;

    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations

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