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Foreign Direct Investment and Restructuring in the Automotive Industry in Central and East Europe

Listed author(s):
  • Slavo Radosevic


    (UCL School of Slavonic and East European Studies)

  • Andrew Roziek

    (UCL School of Slavonic and East European Studies)

This paper reviews and explores the major effects of FDI on industry restructuring of the CEE automotive industry. In particular, we are interested if automotive companies have exploited the value creation potential of CEE? Which factors explain the scale and depth of automotive industry restructuring in CEE? What are the economic effects of restructuring the automotive industry in terms of employment, trade and technology? What has been the role of national and EU policies in shaping FDI and restructuring in the CEE automotive industry? Our results suggest that the value creation potential of CEE as a global automotive location has not yet been fully exploited with great differences across countries. A combination of country specific factors (proximity to EU markets, socialist heritage in automotive industry, skilled labour and privatisation policies) coupled with strategies of automotive MNCs have generated different country patterns and very different effects on industry. Improvements in productivity and technology transfer in both embodied (equipment upgrading) and disembodied form (know how) are significant in countries with large FDI in automotive industry. Employment effects are positive in particular in automotive suppliers industry. Privatisation policy in early 1990s which was followed by a policy of attracting Greenfield FDI on the eve of EU accession is crucial in explaining country differences in FDI presence. Automotive investors have foreseen EU accession and in that respect, EU membership will not bring to changes in trend but possibly a deepening of the automotive cluster in central Europe. However, whether this will happen or not will depend on the ability of CEECs to develop sector specific policies which would support the upgrading of local automotive suppliers.

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Paper provided by UCL School of Slavonic and East European Studies (SSEES) in its series UCL SSEES Economics and Business working paper series with number 53.

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Length: 41 pages
Date of creation: Mar 2005
Handle: RePEc:see:wpaper:53
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