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Three Indirect Effects of Foreign Direct Investment: Evidence from the Czech Republic

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  • Adam Gersl

    (Czech NAtional Bank)

Abstract

Foreign direct investment has been one of the main drivers of economic developments over the past few years in Central and Eastern Europe (CEE). Within the ongoing globalization and international division of labor, a large number of foreign companies have established production units in CEE countries to benefit from low labor costs and other advantages. This study looks both in theoretical and empirical terms at whether large foreign presence has also affected domestic firms. Foreign firms might both intentionally and unintentionally influence the productivity, financing and export performance of local firms within the same industry or across industries along the production chain via subsupplier and client linkages. Economic theory does not suggest unambiguous answer to a question whether the influence is positive or negative. For answering the question, both firm-level and industry-level data on performance, financing and exports and interactions of firms within production chain in the Czech Republic are analyzed.

Suggested Citation

  • Adam Gersl, 2008. "Three Indirect Effects of Foreign Direct Investment: Evidence from the Czech Republic," ACTA VSFS, University of Finance and Administration, vol. 2(1), pages 15-37.
    • Handle: RePEc:prf:journl:v:2:y:2008:i:1:p:15-37
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    Keywords

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    JEL classification:

    • F21 - International Economics - - International Factor Movements and International Business - - - International Investment; Long-Term Capital Movements
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • L60 - Industrial Organization - - Industry Studies: Manufacturing - - - General
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • F40 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - General

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