Foreign capital and its effects on investment outlays in Polish manufacturing in the first years of transition, 1993-1998
Using panel data this paper examines the impact of firms with foreign capital on investment outlays in Poland. Since almost one half of FDI is concentrated in Polish manufacturing the empirical research focuses on that sector. The analysis is based on unpublished firm level data compiled by the Polish Central Statistical Office on an annual basis for 1993-1998. Data are aggregated up to the three-digit level of the EKD (103 industries) – the Polish correspondence to the NACE. During transition in Poland domestic manufacturing faces financial constrains. The role of foreign capital should be to provide external source of finance. Our analysis indicates that FDI has some positive short-run effects on investment outlays in Polish manufacturing. Current cash flow (approximated by net profits) and presence of firms with foreign capital seem to be alternative factors enhancing investment level in manufacturing. This may suggest that, on average, foreign investors reinvest - at least - a part of their net profits in Poland. However the results differ between industries.
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