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253
Chapter 14
Competitiveness, Entrepreneurship,
and the Business Environment in
Greece: Aspects from the EU South
Aristidis Bitzenis, John Marangos,
Vasileios A. Vlachos, Nikos Astroulakis,
Giorgos Meramveliotakis & Antonis Tsitouras
ABSTRACT
The purpose of this chapter is to determine the competitiveness, exercise of
entrepreneurship and quality of the business environment in Greece, based
on the analysis of the motives and barriers of inward foreign direct invest-
ment (FDI) for the period 1995-2003. The analysis was based on research
that was carried out using a questionnaire, which was sent to 150 multina-
tional enterprises (MNEs) that had invested in Greece in the aforementioned
period. The sample size consisted of fifty-two MNEs and the response rate
was 34.6 percent. According to the questionnaire results, the main motives
for FDI in Greece, which is considered as a proxy for the level of entrepre-
neurship in Greece, were: the prospects for market growth, political stabil-
ity, economic stability, the size of Greek market, social stability, and the
2004 Olympic Games. The primary barriers to entrepreneurship in the
Greek market mentioned by MNEs were bureaucracy, followed by the
taxation system, corruption, and the labor market. Government officials and
policy makers in Greece, students of economics, in particular, of inter-
national development and international business/management, would benefit
from this novel approach in determining motives and barriers of FDI in
Greece as a proxy for the level of entrepreneurship and, consequently,
developing the appropriate policy response with the goal of further stimulat-
ing FDI in Greece.
254 Bitzenis, Marangos et al.
INTRODUCTION
The level of entrepreneurship and the business environment in Greece un-
doubtedly has been questioned by both domestic and international investors.
This is a major concern as the level of entrepreneurship and the business
environment in Greece directly influences the level of both foreign and local
investments, and thus production, economic growth, unemployment, and
living standards. The purpose of this chapter is to determine the level of
competitiveness, entrepreneurship, and the business environment in Greece
by examining the motives and the barriers that resulted in limited inward
foreign direct investment (FDI) in Greece during the period 1995-2003. Our
critical analysis is based on research by Bitzenis and Tsitouras (2007a;
2007b) and Bitzenis et al. (2009a; 2009b) that used a questionnaire survey
with the participation of fifty-two multinational enterprises (MNEs) that had
invested in Greece. Moreover, the project sought to determine whether there
is any correlation between the sector within which the MNE operates with
the consideration of specific FDI motives and barriers that the foreign firms
encountered before or during their investment project in Greece.
The motives and barriers that determine the participation of MNEs in
Greece reported in this survey are uncritical indications of entrepreneurship
and the level of business environment in Greece. According to our know-
ledge, on the one hand, while the FDI’s contribution to social and economic
development in Greece has been analyzed extensively, on the other hand,
determining the motives and barriers to entry by MNEs in the Greek market
through a questionnaire survey has not been explored. Government officials
and policy makers in Greece, students of economics, in particular, of inter-
national development and international business/management, would benefit
from this novel approach in determining motives and barriers of FDI in
Greece as a proxy for the level of entrepreneurship and, consequently, de-
veloping the appropriate policy response with the goal of further stimulating
FDI in Greece. The chapter wishes to contribute empirically to the econom-
ics literature, especially within the context of the international business and
entrepreneurship literature, by demonstrating the relevance of theoretical
propositions by using Greece as a case study. Greece was chosen as a case
study because Athens in Greece was selected as the host city of the 2004
Olympic Games and, within this context, the investment motives and bar-
riers to entry by MNEs using a questionnaire survey have not been investi-
gated in the literature.
The chapter is organized as follows. Section one presents the theoretical
issues of the theme. Section two develops the research methodology and
design. Section three provides the research findings by tabulating the most
important motives and barriers, and further analyzes each motive and barrier
in detail. Finally, section four supports the concluding remarks and policy
implications.
THEORETICAL ISSUES
Competitiveness as a catchall phrase in the twentieth century has been at the
core of the economic analysis. The term, as a comparative concept, can
Competitiveness, Entrepreneurship, and the Business Environment 255
equally refer to microeconomic as well as to macroeconomic analysis. At a
microeconomic level the concept deals with the performance of a firm’s
productivity, while at a macroeconomic level it is concerned with the effec-
tiveness of national productivity. According to Porter (1990: 73), “a nation’s
competitiveness depends on the capacity of its industry to innovate and up-
grade.” Particularly, national competitiveness should be analyzed as a func-
tion of the business environment, the level of FDI, and the quality of entre-
preneurial activity. To our view, the enhancement of competitiveness is
strongly correlated with a positive business environment and with a flou-
rishing entrepreneurship. For that reason, the subsequent analysis begins
with the inquiry of the entrepreneurship concept.
The origination of the term entrepreneurship traces back to Schumpe-
ter’s economic thought. In Schumpeter’s view (1934), the entrepreneur is
the person who takes the risk to: establish a new organization; introduce a
new good or service; create a novel method of production; enter in a new
market; and acquire new raw materials to establish a supply chain. Thus, as
it has been argued by Bitzenis and Nito (2005), and Howorth et al. (2005),
an entrepreneur can be an innovator, a risk taker, a person who operates
resources, recognizes opportunities, and establishes one or more businesses.
An entrepreneur also develops, builds and sustains a business based on new
ideas, maximizes benefits and profits, and meets personal objectives (Hayek
1937; Schumpeter 1950; von Mises 1963; Knight 1971; Kirzner 1973;
Ritchie and Brindley 2005).
In the last twenty years, the idea of entrepreneurship has become the
fundamental bedrock in understanding the evolution of economic develop-
ment. Indeed, current economic scholars, such as Gartner (1988), Jarilo
(1989) and Wiklund and Shepherd (2005), regard entrepreneurship as one of
the driving forces of economic growth. It is, therefore, important to stimu-
late competitiveness through entrepreneurship and a positive business envi-
ronment via the formation and expansion of commercial businesses and en-
terprises, which can play a key role in employing underused resources for
the creation of wealth.
In this vein, the Greek case is coming to the forefront. The purpose of
this section is to display a picture of the literature concerning the state of
competitiveness and entrepreneurship in Greece which influences the Greek
business environment. The following surveys approach the notion of entre-
preneurship in terms of market structure, organizational form of firms, and
behavioral pattern of the entrepreneur, and apply a number of factors that
affect competitiveness, the exercise of entrepreneurship, and the develop-
ment of an optimistic business environment. The methodology that is
adopted encompasses the common methods of statistical analysis, question-
naires and interviews. More or less, all the surveys discover that the socio-
economic environment in Greece does not encourage advance of entrepre-
neurial activities, negatively influencing competitiveness and the business
environment and thus numerous economic and policy implications are de-
rived.
To embark on our analysis, a historical retrospection of Greek industrial
development aspects of competitiveness is required. According to Giannitsis
(1988: 17-38), there were three crucial factors that determined the degree of
Greek industrial development from the end of World War II to the early
1980s: firstly, the way that accumulation of capital took place; secondly, the
256 Bitzenis, Marangos et al.
integration of the Greek market into international markets; and thirdly, go-
vernmental functions and policies. Regarding the first, the accumulation of
capital in the manufacturing field was relatively low. Indicatively, during
the period of 1960-76, investments at the manufacturing field represent the
lowest proportion in terms of GDP among OECD countries. Additionally,
domestic entrepreneurs were focusing on more speculative investments in-
stead of developing a sustainable productive industrial model. What is
striking is that the rate of industrial development during this period was
based mainly on FDI and foreign technology rather than on endogenous
(domestic) productive forces. Moreover, the association of the inward-
looking character of FDI (not export oriented) and the parallel rise of a
westernized consumption model created large deficits to the balance of pay-
ments. At the same time, the substitution of market functions continually by
government intervention established an unproductive and costly bureau-
cracy which had significant negative effects on Greek competitiveness.
For the subsequent decades, 1980s-2000s, the entrance of Greece to the
European Union (EU) and to EU’s Economic and Monetary Union (EMU),
as well as the introduction of the single currency Euro was considered a
historical opportunity for the Greek economy to overcome structural weak-
nesses and to be adjusted to the contemporary needs of international com-
petition and globalization. However, the course of events did not confirm
the above expectations. Regarding the business environment, a twofold ef-
fect has been in progress. On the one hand, the Greek business environment
has become more stable and secure via the monitoring of EU institutions
and organizations (EU Central Bank, Euro, European directives). On the
other, through the openness and internationalization of the Greek market, as
a part of the European market, the business environment has been exposed
to more risky and hazardous conditions of globalized exchanges.
As the public sector has always been the major employer in Greece, the
primary concern is whether the restrictions on public spending imposed by
the Stability and Growth Pact (SGP) are able to affect growth. The cessation
of any negative effects of public investment spending on private investment
as an indirect effect of the SGP, the constant effort for privatization and de-
regulation, and the aid of structural funds, were and are still expected to
substitute public investment with private, domestic and foreign, direct in-
vestment (Apergis 2000; Mamatzakis 2007). This change of direction in the
organization of the Greek economy is the result of the assumption that EMU
membership implies greater FDI inflows. Studies indicate that after the in-
troduction of the Euro, the FDI that reached the Euro area was largely a ma-
nifestation of the end-of-century takeover boom, a global phenomenon of
which the Euro was only a subsidiary cause. Even though the intra-Euro
area FDI turned out to be weak, both in relation to previous trends and as a
share of major economies’ global FDI flows, the Euro appears to have given
a modest stimulus to inflows from major investing economies outside the
Euro area (Petroulas 2007; Taylor 2008).
The scope of EMU is economic competitiveness and flexibility to be
accompanied by greater opportunities and stronger social cohesion. Greece,
Ireland, Italy, Portugal, the Netherlands, and Spain experienced a significant
decline in their competitiveness position vis-a-vis the rest of the Euro area.
With the exception of the Netherlands, all countries in this group were still
Competitiveness, Entrepreneurship, and the Business Environment 257
on an appreciation trajectory at the end of 2007, regarding the improvement
of their competitiveness position (European Commission 2008).
The implementation of a number of structural policies are required in
order to improve Greece’s long-term economic performance and help speed
economic and social convergence with average EU member countries: more
flexible and effective labor market policies; competition policy reform; the
liberalization of product markets, in particular the energy, telecommunica-
tion, and transport sectors; policies to foster entrepreneurship; and financial
market reform, including the implementation of a better corporate gover-
nance regime. These areas are particularly important for rapid growth as
they offer substantial scope for catching up with international levels of
competitiveness (Koutsogeorgopoulou and Ziegelschmidt 2005).
Export market share losses appear associated with rigidities in resource
allocation (sectoral, geographical, technological) relative to peers and lower
productivity gains in high value-added sectors. Increased import penetration,
offshoring and FDI could improve productivity and export performance
(Bennett et al. 2008). Changes in manufacturing shares have a positive and
significant impact on competitiveness measured by per capita income, con-
firming that manufacturing matters (Pitelis and Antonakis 2003).
Significant empirical research has also been carried out in three Greek
national reports, Ioannidis (2004), Ioannidis, Politis and Tsakanikas (2005),
and Ioannidis and Tsakanikas (2006)—all supported by the Foundation for
Economic and Industrial Research (IOBE), published by the Global Entre-
preneurship Monitor (GEM). These reports use a number of methodological
tools for the monitoring and evaluation of policies and actions toward the
promotion of competitiveness, entrepreneurship, and a positive business
environment. The research output is derived from adult population surveys,
questionnaires, face to face interviews, and macroeconomic data. Specifi-
cally, the data is collected from a population telephone survey (approx-
imately 2,000 people), and also from thirty-six interviews with the country’s
experts and with the help of statistical data received from the World Bank,
the IMF, Eurostat, the United Nations (UN), and the Organization of Eco-
nomic Co-operation and Development (OECD) (Ioannidis 2004: 4; Ioanni-
dis, Politis and Tsakanikas 2005: 110; Ioannidis and Tsakanikas 2006: 136).
With the aforementioned methodological approaches, the reports at-
tempt to describe the entrepreneurial landscape of Greece and, thus, the pre-
vailing business environment. Therefore, these studies capture a holistic
approach to the study of competitiveness, entrepreneurship, and provide a
variety of factors determining the level of entrepreneurial activity and the
business environment. As a result, a framework of nine conditions was em-
ployed in order to analyze the structure of the Greek entrepreneurial environ-
ment. These were: the financial support (the ability to finance a new venture
or to extend an already existing entrepreneurial activity), government poli-
cies (the extent to which the specific policies encourage or discourage new
and growing firms), government programs (specialized programs for the
enhancement of national, regional, and municipal entrepreneurship), educa-
tion and training (how the educational level is associated with more intense
entrepreneurial activity), research and development (R&D) transfers
(whether or not R&D leads to new commercial opportunities), commercial
and professional infrastructure (the legal and institutional framework for the
promotion of entrepreneurship), market openness-barriers to entry (the de-
258 Bitzenis, Marangos et al.
gree of liberalization of the market), access to physical infrastructure (the
facility to obtain physical resources, utilities, transportation, land, etc. for
operating a new venture) and cultural and social norms (the extent to which
the overall informal institutional structure of the society advances individual
initiatives of conducting business) (Ioannidis 2004: 6-8; Ioannidis, Politis
and Tsakanikas 2005: 106-9; Ioannidis and Tsakanikas 2006: 133-35).
The key conclusions of the three Greek national reports and the propos-
als concerning the development of competitiveness, entrepreneurship, and a
positive business environment in Greece can be summarized as follows. The
Europeanization and globalization of the Greek economy and particularly
the entry to the EMU constitute the contemporary economic environment
where entrepreneurs are activated. However, the structure of Greek entre-
preneurship in terms of sectoral distribution appears to be vastly different
from the counter-structure of entrepreneurship in many other European
countries. As Ioannidis and Tsakanikas (2006: 39-42) remark, Greek entre-
preneurs continue to be overwhelmingly focused on consumer-oriented en-
deavors. These activities represent 61.4 percent of the whole entrepreneurial
actions in Greece, in contrast to 34.2 percent of Europe’s average. The infe-
rence is of a “shallow entrepreneurship” since businesses based mostly on
the consumer sector (contrary to the extractive sector, industrial sector, or
business services) are anticipated to have limited effect in terms of eco-
nomic growth, employment, exports, etc. This is because an entrepreneurial
activity centered mostly on the consumer sector is related with the last link
of the “value chain” that is the final consumer and thus has rather limited
growth potential.
Furthermore, competitiveness and entrepreneurship in Greece present
inherent structural weaknesses attributed to specific behavioral traits and to
prevailing socio-political conditions creating a negative business environ-
ment. Related to the former, Ioannidis, Politis and Tsakanikas (2005: 80)
stress as the determinant behavioral trait the “fear of failure factor” that dis-
courages individuals to start up an entrepreneurial activity. As a result, less
innovative and less risky ventures actually take place in the economy, thus
negatively affecting the business environment. In addition, Ioannidis, Politis
and Tsakanikas (2005: 81) and Ioannidis and Tsakanikas (2006: x-xi), also
record the ambiguous attitude of Greek society toward the notion of
entrepreneurship. Although individuals consider entrepreneurship as a desir-
able career choice (i.e., high level of status and respect for entrepreneurs),
on the other hand, due to the fact that the notion of entrepreneurship is con-
sidered as a means of wealth creation rather than as a means of redistribu-
tion (i.e., individuals detest disparities in income levels preferring that eve-
ryone had a similar standard of living), there is the belief that entrepreneur-
ship is valueless in terms of social justice creating in this way a negative
business environment. Regarding the prevailing socio-political conditions,
Ioannidis and Tsakanikas highlight bureaucracy (2006: 112-13) and the
educational system (2006: x) as the most severe barriers in the promotion of
entrepreneurial activities. Specifically, in Greece, the “monster” of bureau-
cracy generates considerable rigidities for starting up a new business. As
well, the educational system does not provide sufficient practical skills to
graduates required to start-up a business.
In the end, the three national reports recommend the necessary policy
implications for the enhancement of competitiveness, entrepreneurial activ-
Competitiveness, Entrepreneurship, and the Business Environment 259
ity, and creating a positive business environment. What is proposed is in line
with the aforementioned problems. Thus, some of the suggestions are to
diminish the barriers that prevent the establishment of businesses and to
implement uncomplicated procedures for starting up a venture. Aiming to
encourage individuals to take the risk by initiating a new business, bank-
ruptcy laws should be modified in the direction of allowing the entrepreneur
a second chance, consequently enhancing the business environment. Moreo-
ver, Greece has to “update” the educational system to encourage universities
to develop an entrepreneurial culture, thus stimulating a positive business
environment. Eventually, an ultimate suggestion for embedding the idea of
entrepreneurship in Greek society is to promote its positive effects (Ioanni-
dis 2004: iv-vi; Ioannidis, Politis and Tsakanikas 2005: 100; Ioannidis and
Tsakanikas 2006: 112-25). As is evident, the above national reports adopt a
wide approach, exhibiting a panorama of the current entrepreneurial activ-
ities in Greece. Meanwhile, the following surveys deal with competitive-
ness, the concept of entrepreneurship, and the business environment by fo-
cusing on more specific aspects.
Souitaris (2002) espoused a Schumpeterian view by emphasizing the
role of innovation. The author was concerned about identifying the determi-
nant factors that influenced the intensity of the innovation process in
Greece. Especially, Souitaris (2002) attempted to estimate the correlation
between seventeen firm-specific competency factors with the technological
innovation in the Greek industry and attempted to elucidate the results by
providing the particular socio-economic context of Greece. For that reason,
he developed a four-dimensional framework associating market, human
resources, and technical and organizational competencies of the firm with
innovation activity (Souitaris 2002: 63-66). The author identified seventeen
innovation-determining factors (which range from intensity of R&D and the
strength in marketing, to interdepartmental teamwork, and the thinking time
of engineers and managers) and ranked them into “major importance,”
“moderate importance,” and “unimportant” categories by using a regression
analysis. The “most important” were identified as the intensity of R&D, the
proportion of the highly educated employees, the strength in marketing, the
high proportion of staff with managerial responsibilities and previous expe-
rience, and the ability of the firm to give incentives to the employees to
contribute to innovation (Souitaris 2002: 68-70). His aim was to test the
“awareness” of Greek managers with the aforementioned “objective” re-
sults. In other words, Souitaris (2002) investigated whether Greek managers
are generally aware of the important firm-specific competencies advancing
technological innovation. Using a questionnaire (having a 100 percent re-
sponse rate of 105 firms), he concluded that with a few exceptions, Greek
managers were very well aware of the critical factors that determined the
level of a firm’s innovation (Souitaris 2002: 71-72).
Given these findings, Souitaris purported to determine the extent to
which the business environment accelerated the intensity of innovation and
thus enhanced the business environment. He revealed that the most critical
determinants of technological innovation were generally scarce in the Greek
case. Greek SMEs, with low financial resources, were weak in the promotion
of their products. The educational system was characterized as “outdated”
and the result was that firms were staffed with low quality graduates. Addi-
tionally, low labor mobility in Greece implied a low proportion of managers
260 Bitzenis, Marangos et al.
and employees with previous work experience. Besides, Greek entrepre-
neurs were usually reluctant to allocate responsibilities when their busi-
nesses grew and, as a consequence, there was a low proportion of staff with
managerial responsibilities. As well, Greek firms did not give incentives to
the lower level employees to contribute to the innovation process (Souitaris
2002: 72). The conclusion was that these inherent rigidities and obstacles
did not stimulate the innovation process and thus did not promote entrepre-
neurial initiatives and/or a positive business environment.
Drawing upon the experience of the function of Greek firms, Makrida-
kis et al. (1997) offered a different perspective in the study of entrepreneur-
ship. They attempted to appraise the level of entrepreneurship under the
view of what the authors labeled as the “dualism” of firms: the spectrum
possessing in one pole the family-owned enterprises and, to other extreme,
the multinational subsidiaries (Makridakis et al. 1997: 385-88). Using the
ordinary methods of questionnaires and interviews (300 out of 2,027 firms
responded), they investigated if there was any difference in the performance
between the family-owned firms and multinational subsidiaries. Family-
owned enterprises are administrated by Chief Executive Officers (CEOs),
who are usually the owners, founders, or descendants, contrasting to the
CEOs in multinational subsidiaries, who are professional managers with
international experience. The upshot is that the productivity and overall per-
formance of the former lags considerably behind the latter. Given the above
and taking into consideration that family-owned enterprises mainly typify
the majority of firms in Greece, a deficit in the level of entrepreneurship in
Greece is demonstrated (Makridakis et al. 1997: 399). Accordingly, the con-
clusion is straightforward as authors mainly assign the weakness of Greek
entrepreneurship and the negative business environment to the managerial
skills of the person who manages the family-owned company, who is un-
educated, autocratic, and paternalist contrary to well-educated and cosmopo-
litan professional CEOs of multinational subsidiaries.
In contrast, Naumes and Naumes (1994) argued that the profile of pro-
fessional Greek CEOs was not too different from that of American CEOs.
Looking at similarities and differences in the behavioral patterns of Greek
and American entrepreneurs, the authors discerned a more or less similar
mode of decision-making. Particularly, the results, obtained from 398 ques-
tionnaires (including 381 responses from U.S. entrepreneurs and 17 replies
from Greek CEOs), indicate that the risk propensity is similar between the
two groups. In addition, it is asserted that the Greek and U.S. entrepreneurs’
economic and political values are also consistent. The outcome is that both
groups share in a same manner of decision-making, achieving their
objectives in a rational and self-interested fashion. What is interesting is that
Naumes and Naumes (1994: 10-11) argued that the above similarities tend
to moderate the effects drawing from their cultural disparities. On the other
hand, Kalantaridis’ (1997) endeavor was toward the opposite direction. He
attempted to demonstrate how cultural homogeneity and local social factors
prompt entrepreneurial activities and quality of the business environment.
Using a historical and social analysis, he pointed out that the embeddedness
of entrepreneurship in small communities was not only determined by
strictly market conditions and profit opportunities, but was also influenced
by the presence of local social values. Based upon the experience of the Po-
likastro-Peonia’s garment producing district of Northern Greece, he argued
Competitiveness, Entrepreneurship, and the Business Environment 261
that the establishment and advancement of entrepreneurial activities and a
positive business environment in this area can be traced also to the close
relationships of kin and friendship that have been primarily attributed to
locality.
In preparation for our analysis, we have attempted in this section to
outline the main literature concerning the state of Greek competitiveness,
entrepreneurship, and business environment. From a methodological and
analytical viewpoint, it could be argued that the majority of the aforemen-
tioned literature shares a common perspective: the analysis of competitive-
ness, entrepreneurship, and the business environment from an “inside” pers-
pective. This approach deals with competitiveness, entrepreneurship, and
the business environment based on internal market conditions by domestic
players. This means that only domestic players and factors are taken into
examination, constituting a “narrow” point of view. However, the intensity
of the globalization process imposes the embodiment of “foreign” factors
and thereby the adopting of an “outside” approach for the study of competi-
tiveness, entrepreneurship, and the business environment. In other words,
what follows is an attempt to enrich and incorporate factors of global com-
petition in the appreciation of Greek entrepreneurship and the business envi-
ronment concomitantly. The aforementioned reports describe the influence
of the local environment on domestic entrepreneurship. These reports and
their results may not be directly applicable to MNEs, as MNEs differ in the
way that the investment decision-making is influenced by the local business
environment.
For the aforementioned reasons, inward FDI as an additional factor de-
termining competitiveness, entrepreneurial activity, and the business envi-
ronment is introduced. The aim of the current research is to determine the
level of competitiveness, entrepreneurship, and the business environment in
Greece by examining the motives and the barriers that resulted in limited
inward FDI during the period 1995-2003. Previous studies concerning FDI
inflows in Greece focused on FDI attractiveness and highlighted inefficient
public governance, high taxation, inefficient infrastructure, and general
macroeconomic conditions as the decisive factors of foreign investors’
averseness (Apergis and Katrakylidis 1998; Filippaios and Kottaridi 2004;
Pantelidis and Nikolopoulos 2008). No more than two references exist on
the determination of motives for inward FDI in Greece. The work of
Georgopoulos and Preusse (2006) indicates Greece’s inability to attract con-
siderable market-seeking, export-oriented, and efficiency-seeking FDI due
to location weaknesses. Pantelidis and Nikolopoulos (2008) imply in their
study that the primary FDI inflows to the Greek economy are market and
efficiency-seeking motives for FDI.
RESEARCH METHODOLOGY AND DESIGN
Bitzenis and Tsitouras (2007a; 2007b) and Bitzenis et al. (2009a; 2009b)
designed a questionnaire to extract valuable information regarding the de-
terminants of FDI, that is, the motivations and entry barriers for inward FDI
in Greece that resulted in limited inward FDI during the period 1995-2003,
as demonstrated in Table 14.1.
262 Bitzenis, Marangos et al.
TABLE 14.1
FDI Inflows in Greece, 1970-2003 (in millions of US$)
Year FDI
Inflows
($ millions)
% Change
over Previous
Period
Year FDI
Inflows
($ millions)
% Change
over Previous
Period
1970 76.2 1987 391.1 27.9
1971 83.6 9.7 1988 599.2 53.2
1972 90.2 7.9 1989 639.4 6.7
1973 145.1 60.9 1990 900.5 40.8
1974 189.3 30.5 1991 1,135.0 26.0
1975 199.1 5.2 1992 1,144.0 0.8
1976 221.2 11.1 1993 977.0 -14.6
1977 273.4 23.6 1994 981.0 0.4
1978 325.3 19.0 1995 1053,0 7.3
1979 364.2 12.0 1996 1,058.0 0.5
1980 502.4 37.9 1997 984.0 -7.0
1981 409.8 -18.4 1998 85.0 -91.4
1982 304.1 -25.8 1999 571.0 571.8
1983 313.4 3.1 2000 1,089.0 90.7
1984 246.1 -21.5 2001 1,589.0 45.9
1985 289.6 17.7 2002 50.0 -96.9
1986 305.9 5.6 2003 47.0 -6.0
Source: Bank of Greece, various years; UNCTAD 2003, 2004.
The importance of FDI, reflecting the level of competitiveness, entre-
preneurship, and the business environment in the European Union (EU), has
increased significantly over the years as indicated by the ratio of FDI inward
stock to GDP, which has risen from 10.6 percent in 1990 to 31 percent in
2001. Also, an increasing share of FDI flows worldwide has been absorbed
by the EU, which, to a great extent, coincides with the Single Market Pro-
gram (SMP). Greece, however, has not followed similar patterns in terms of
FDI inflows reflecting the level of competitiveness and entrepreneurship
and the negative, to some extent, business environment. In general, the share
of Greece in total FDI inflows to the EU has not exceeded 1.0%, which is
the lowest among the member states (UNCTAD 2003). At the end of 2002,
according to UNCTAD (2004), 701 foreign MNEs operated in Greece with
a number of 87,558 employees (2 percent approximately, of the total
employees of Greece) and sales of $20,489 billion. Worse still is the fact
that the share of Greece in total FDI in the EU has continued to fall since the
1990s, because of Greece’s poor location, negative business climate, and
weak skills base (EIU 2004). Athens was chosen as the host city of the
Olympic Games of 2004 during the 106th IOC Session held in Lausanne on
September 5, 1997. Academic/scientific literature suggests that hosting ma-
jor sporting events has a positive contribution to the host area economy,
expecting a boost in infrastructure, financial flows, and economic develop-
ment (Berman et al. 2000; Veraros et al. 2004). This announcement can be
considered as one of the most decisive factors responsible for the FDI boom
Competitiveness, Entrepreneurship, and the Business Environment 263
that took place in Greece in the time period after the announcement and be-
fore the conduct of the Olympic Games of 2004. Thus, in the time period
1999-2001 Greece received more than US$3 billion.
The application of a logit or probit model would be appropriate for the
examination of such data (Salavrakos and Petrochilos 2003). If this was the
case, the dependent variable in this study would represent only foreign en-
terprises investing directly in Greece, leading to a biased outcome. Instead,
descriptive statistics are employed, keeping in mind that Holland et al.
(2000) concluded that econometric evidence supports the findings of survey
studies.
The questionnaires of the survey reported in this chapter were collected
between June and September of 2004. The construction of the three-part
questionnaire was mainly based on Dunning’s (1988; 1993) theory, the ec-
lectic theory (OLI—eclectic paradigm of international production), although
the Universal model was also used (Bitzenis 2003). The questionnaire used
in the research study consisted of three parts. In the first part, the questions
provided the necessary background information on certain issues that were
considered important in characterizing the sample population. In the second
part, one question included seven groups of sub-questions with related fac-
tors that were considered to be of major importance and allowed the manag-
ers of the enterprises to select the most appropriate answer for their case.
These groups of sub-questions were initially selected based on Dunning’s
OLI theory, but necessary amendments were made using the Universal
model (Bitzenis 2003).
Therefore, in the second part of the questionnaire, seven groups of hunt-
ers (seekers) have been created: locational hunters (historical links, cultural
closeness or distance, geographical proximity, stability, climate etc.), factor
hunters or natural resource hunters (access to low cost of acquiring natural
resources and raw materials Dunning 1988: 13), market hunters (size of the
market, prospects for market growth, increasing market share), strategic
market hunters (follow the competition, follow the clients, a way to survive,
acquiring of assets, international pressures, globalization etc.), efficiency
hunters (economies of scale, of scope, risk diversification), exploiting the
ownership advantages hunters (brand name, know-how, past experience,
existing business links etc.), and hunters of financial aspects (favorable in-
vestment law framework, subsidies, tax exemptions).
In the third part, there are twenty entry barriers (instability, bureau-
cracy, corruption, unstable legal system, etc.). In accordance with Dunning
(1998; 1993), we have included in our survey: the Locational (L) (natural
resources availability and cost, investment incentives, characteristics of the
country—language, culture…), Internalization (I) (avoid costs, control
supplies, avoid or exploit government intervention), and Ownership
advantages (O) (intangible asset advantages, product innovations, know-
how, multinationality). Dunning (1993; 1988) also defines natural resource
seeking (vertical integration, availability, cost), market seeking (market size
and characteristics, investment incentives Dunning 1993: 82), efficiency
seeking (economies of scale and scope, risk reduction through product
diversification Dunning 1988: 13) and strategic asset seeking (gain new
product lines or markets, economies of synergy, economies of common go-
vernance, improved competitive or strategic advantage, reduce or spread
risks Dunning 1993: 82).
264 Bitzenis, Marangos et al.
A descriptive/analytical type of research was undertaken, as it was best
suited for the research objectives examined. The sample was determined on
a quota basis (non random selection) involving the selection of subjects
based on the identification of specific characteristics to increase representa-
tiveness. In quota sampling, the target population is divided into subgroups
on the basis of different characteristics. In the case of this survey, the sub-
groups were: the companies from different types of industries, the volume of
investments, and the number of employees, then a quota was determined for
each subgroup. Thus, based on the criterion of the largest investment deals
in Greece, a quota was made with the help of a few official documents which
were retrieved from the Hellenic Center for Investment (ELKE) consisting
of 101 foreign companies. Another forty-nine companies were added from
the authors’ research from directories of various Chambers of Commerce
and Industry as well as embassies. As a result, a final list of 150 foreign
companies was developed. The aim of this chapter is to analyze and to draw
conclusions regarding the motives and barriers of FDI during the period
1995-2003 as indicators of entrepreneurship and the business environment
in Greece.
To determine the most appropriate sample and sampling technique, the
authors took into consideration the aim of the current study, which was to
identify the motives and barriers that foreign firms had evaluated when they
decided to invest in Greece as indicators of entrepreneurship and the busi-
ness environment. Bitzenis and Tsitouras (2007a; 2007b) and Bitzenis et al.
(2009a; 2009b) chose to adopt the non-probability sampling method, using
the technique of purposive sample. This strategy was considered the most
appropriate because the questions contained within the questionnaire requi-
red the views of people who were or would have been involved in the ex-
amination of Greek business factors/conditions that was FDI motives/obsta-
cles.
Furthermore, it was investigated whether there was any relation of the
sector that each MNE belonged to in determining the specific motives and
barriers that encouraged or discouraged MNEs to undertake FDI projects in
Greece. Thus, it was necessary for Bitzenis and Tsitouras (2007a; 2007b)
and Bitzenis et al. (2009a; 2009b) to have a proportional distribution of
MNEs in the field of economic activity. Finally, the survey instrument was
pre-tested by interviews with three managers of MNEs. The overall aim of
this study was to identify the kind and the type of incentives and barriers
that foreign firms considered in order to decide whether they should make
an investment in Greece. The study went beyond the simple description of
events, and sought to find answers to all reasonable queries. Subsequently,
the level of FDI determined, to a great extent, the aspect of Greek economic
competitiveness.
Fifty-two out of 150 MNEs responded, which equates to a response rate
of 34.6 percent. Literature has shown that this response rate in the subject
area is sufficient and, according to statistics, a response rate of 10 percent of
the population of interest is regarded as big enough to allow secure infe-
rences about the population of interest. The usual way of replying to ques-
tionnaires, via mail, was extremely low in this study. Only 5.78 percent of
the companies replied in this way. The highest yield was the result of email
or internet websites with 57.69 percent of the total response rate, followed
Competitiveness, Entrepreneurship, and the Business Environment 265
by fax and telephone with 28.84 percent. The one to one interviews had suc-
cess in 7.69 percent of the total response rate (see Figure 14.1).
The sample is representative because there is a proportional distribution
of MNEs in various sectors of economic activities. The industrial sector
accounted for 53.84 percent (Mining 5.77 percent + Manufacturing 40.38
percent + Construction 7.69 percent, see Figure 14.2), while the FDI inflows
in Greece in the same sector and at the same period were 52.69 percent
(Mining 5.04 percent + Manufacturing 44.10 percent + Construction 3.55
percent). Furthermore, the trade sector in the survey questionnaire
accounted for 25 percent of respondents, while the FDI inflows in Greece in
the same sector were 11.53 percent. Finally the responses from the services
sector accounted for 21.16 percent (Transportation & Communication 7.69
percent + Leasing/Real Estate 5.77 percent + Hotels 3.85 percent), while the
FDI inflows in Greece in the same sector and at the same period were 35.78
percent (Transportation & Communication 21.51 percent + Leasing/Real
Estate 4.19 percent + Hotels 10.08 percent) (see Figure 14.2).
The total investment amount for the fifty-two foreign companies was
US$ 1,465,022,000 which is 29.90 percent of the total Greek FDI inflows
(US$ 5,051,800,000) during the period 1995-2003. The majority of
respondents invested between US$ 25 and US$ 50 million (41.38 percent) in
Greece, followed by foreign investors that invested between US$ 50 and
US$ 100 million (33.69 percent). A significant number of respondents
(20.16 percent) invested between US$ 1 and US$ 25 million (see Figure
14.3).
In administering the survey, particular attention was directed toward
ensuring that individual survey respondents were equipped to represent the
position of the company as a whole. About one third of respondents held a
top position such as Chief Executive Officer, President, Chief Financial Of-
ficer, or Chairman, and nearly all other respondents held senior management
posts, and/or were involved directly in strategic planning (see Figure 14.4).
FIGURE 14.1
Method of Reply of Respondents
266 Bitzenis, Marangos et al.
FIGURE 14.2
Respondents by Industry in Percent
FIGURE 14.3
Respondents by Amount of Investment in Million US$
Competitiveness, Entrepreneurship, and the Business Environment 267
FIGURE 14.4
Positions Held by Individual Respondents in Percent
RESEARCH FINDINGS: MOTIVES AND BARRIERS
OF FDI IN GREECE
The statistical literature has shown that the response rate, 34.6 percent is
sufficient to allow secure inferences about the population of interest. The
managers that were surveyed were asked to mention any number of motives
and barriers that they considered to be the most decisive for their company
in undertaking an FDI project in Greece. Therefore, the sum of the per-
centages found in the Tables is not equal to 100 percent. From Table 14.2, it
can be pointed out that the main motives for FDI in Greece reflecting the
entrepreneurship and the business environment in the Greek market were the
prospects for market growth (86 percent), political stability (78 percent),
economic stability (77 percent), the size of the Greek market (61 percent),
social stability (59 percent), and the Olympic Games 2004 (58 percent).
TABLE 14.2
The Most Important Motives for FDI in Greece
Motives Percentage of
Respondents Sector Relevance
Prospects for Market Growth 86.50 No
Political Stability 78.80 No
Economic Stability 76.90 No
Size of Greek Market 61.50 Yes
Social Stability 59.60 No
Olympics Games 2004 57.70 No
Source: Authors’ questionnaire results.
From Table 14.2 it is revealed that the prospects for market growth
ranks first at 86.5 percent; it received 61.5 percent of the positive responses.
MNEs from all sectors that considered Greece as a promising market re-
sponded positively. All multinationals belonging to the banking/services
sector argued that this is an important motive, while 92.3 percent of MNEs
operating in the trade and food industry and 78.6 percent in the industrial/
268 Bitzenis, Marangos et al.
manufacturing sector also determined that this was an important motive.
Thus, the sector within which the MNE operates does not influence this
motive. Although Greece is not a big market, this high percentage in consi-
dering the prospects for market growth as a decisive motive is mainly due to
the preparation of the Olympic Games. From Table 14.1, we can see that
this is the case. The “Host to the Olympics 2004 in Greece” as an FDI mo-
tive was mentioned by 57.7 percent of MNEs. It is also worth pointing out
that the MNEs that mentioned the FDI motive, prospects for market growth,
as significant also considered “Host to the Olympics 2004 in Greece” as a
motive for FDI in 90 percent of the cases. It is obvious that the tremendous
infrastructure investments, which took place prior to the Athens 2004
Olympics, will provide a solid platform for future market growth. These
findings are consistent with the Ioannidis and Tsakanikas (2006: 39-42)
conclusion that Greek entrepreneurs focus on consumer-oriented endeavors.
It appears that FDI in Greece during the period of investigation is also con-
sumer-oriented, especially due to the hosting of the Olympics 2004, which
created a positive business environment for increasing final consumption.
The existence of the combined motive “Economic and Political Stabil-
ity” in the second and third place was an expected outcome since Greece has
been the only member country in the EU region since 1981 and until May
2004, and a full member of the Eurozone as of January 2001. Greece has
undergone extensive restructuring, enough to secure, at least, a nominal
convergence with its European Union partners. Political stability as a motive
to enter the Greek market received 78.8 percent positive responses. Regard-
ing the sectors to which each MNE belongs, 75 percent from manufacturing
sector, 84.6 percent from trade and food sector, and 81.8 percent from
banking/services sector argued that political stability was a significant mo-
tive. Thus, the sector within which the MNE belongs does not influence the
political stability motive. With regard to economic stability as a motive, it
received a positive response of 77 percent; again the sector in which the
MNE operates does not influence this motive: 75 percent from the industrial/
manufacturing sector, 84.6 percent from the trade/food sector, and 72.7 per-
cent from the banking/services sector argued that political stability was a
significant motive. Therefore, the aforementioned finding in connection
with Naumes and Naumes’ (1994) deduction that Greek and U.S. entrepre-
neurs share quite similar economic and political values, could provide a
rationale for the fact that the majority of FDI in Greece is originated in the
United States. Another reason may be due the fact that a lot of Greeks
migrate to the United States and as a result there is a strong Greek commu-
nity in the United States establishing trade relations between the United
States and Greece.
Of the fifty-two multinationals that responded to the survey, thirty-two
(61.5 percent) argued that the size of the Greek market is an important
motive. Regarding the sectors to which each MNE belongs, 42.9 percent
from the industrial/manufacturing sector, 92.3 percent from the trade/food
sector, and 72.7 percent from the banking/services sector argued that it was
a significant motive to enter the Greek market. Thus, it appears that the
sector within which the MNE operates influences the significance of this
motive. The size of the Greek market (around eleven million possible
consumers) is more important mainly for the MNEs in the trade/ food sector
and the services sector than for other sectors such as the industrial or the
Competitiveness, Entrepreneurship, and the Business Environment 269
manufacturing sector due to the proximity of these sectors to consumers.
Hence, in addition to Ioannidis and Tsakanikas’ (2006: 39-42) inference that
the Greek entrepreneurs mainly focus on consumer-oriented activities, it is
also deduced that FDI in Greece is consumer-oriented. Furthermore, FDI is
inward-looking and the subsequent inward technology has as the result the
shortage of Greek technological innovations. This means that Greece has
been a “consumer” rather than a “producer” of R&D and technology, with
profound negative implications for Greek industrial development and
competitiveness.
Social stability as a motive to enter the Greek market received a 59.6
percent positive response. There is no impact of the specific sector that the
MNEs operate, as 53.6 percent from industrial/manufacturing sector, 61.5
percent from trade/food sector, and 72.7 percent from banking/services
sector argued that social stability is an important motive. This finding is
consistent with Kalantaridis (1997) that social values and hence social
stability enhance entrepreneurship and stimulate an optimistic business
environment.
The decision that Greece would host the 2004 Olympics was announced
in 1997. This decision encouraged many multinationals to enter the Greek
market prior to the 2004 Olympics. At the same time, the findings from the
questionnaire reveal that 57.7 percent of MNEs considered the Olympics as
an important FDI motive. Olympics 2004 created numerous opportunities
for foreign companies in the field of security, transportation, construction,
catering, etc. The companies from the various sectors that responded posi-
tively have seen more or less this motive in the same way. So, the sector that
each multinational belongs to was indifferent in the consideration of this
motive as a decisive FDI motive. 53.6 percent of multinationals from the
industrial/manufacturing sector, 61.5 percent multinationals from the trade/
food sector, and 63.6 percent multinationals from the services/banking
sector considered this motive as vital. This re-confirms, in addition to
Ioannidis and Tsakanikas’ (2006: 39-42) characterization of the Greek
entrepreneurship as “shallow,” the above assertion that FDI in Greece is also
consumer-oriented.
The primary barriers with which investors had to deal, reflecting entre-
preneurship and the business environment in the Greek market, is shown in
Table 14.3. The biggest obstacle was bureaucracy (86.53 percent), followed
by the taxation system (71.15 percent), corruption (65.78 percent), high
corporate tax (63.46 percent), the labor market (61.53 percent), and the legal
system (55.76 percent). In the following, we analyze each motive and
barrier in detail and discuss the studies analyzed in the literature review
under a comparative/critical perspective with the goals of the current study.
The high percentage of 86.5 percent of the surveyed companies
mentioned bureaucracy as an important barrier for their FDI in Greece
negatively affecting entrepreneurship and the business environment (Table
14.3), which is consistent with Ioannidis and Tsakanikas (2006: 112-13).
Using the survey, we found that the sector that each MNE belongs to does
not play a significant role in the consideration of bureaucracy as a barrier for
FDI. In other words, 85.7 percent of MNEs of the industrial/manufacturing
sector, 100 percent of the services sector, and 76.9 percent of the trade/food
sector looked upon bureaucracy as a decisive FDI barrier. These are
extremely high percentages. Also, the high percentage of 71 percent of the
270 Bitzenis, Marangos et al.
surveyed companies mentioned the Greek tax system as an important barrier
for their investment in Greece negatively affecting entrepreneurship and the
business environment. The sector that each MNE belongs to does not play
any role whatsoever in the consideration of the Greek tax system as a
barrier. In other words, 75 percent of MNEs of the industrial/manufacturing
sector, 69.2 percent of MNEs of the trade/food sector, and 63.6 percent of
MNEs of the services/banking sector recognized the Greek tax system as a
decisive FDI barrier. These percentages are indeed very high.
TABLE 14.3
The Most Important Barriers to FDI in Greece
Barriers Percentage of
Respondents Sector Relevance
Bureaucracy 86.53 No
Taxation System 71.15 No
Corruption 65.78 Yes
Corporate Tax 63.46 Yes
Labor Market 61.53 No
Legal System 55.76 Yes
Source: Authors’ questionnaire results.
From the questionnaire responses we note that 65.78 percent of the total
foreign MNEs listed corruption, bribery or other illegal actions as important
obstacles for their FDI projects in Greece negatively affecting entrepreneur-
ship and the business environment: 78.6 percent foreign MNEs from the
industrial/manufacturing sector and 76.9 percent MNEs from the trade/food
sector saw corruption as an important FDI barrier. However, only 18.2 per-
cent of the services and banking companies were affected negatively by
corruption. Thus, it can be argued that the sector that each MNE belongs to
plays a decisive role in the consideration of corruption as an FDI barrier. It
appears that banking/services sector is not affected easily by corruption as
the regulatory framework is mostly determined by the European Commis-
sion, the European Central Bank (ECB) and, in general, the Economic and
Monetary Union (EMU) since in 2001 Greece became an EMU member and
adopted the Euro as its national currency.
A possible solution to the problems of corruption and the ambiguous
attitude of Greeks toward entrepreneurship (Ioannidis, Politis and Tsakani-
kas 2005: 81; Ioannidis and Tsakanikas 2006: x-xi) could be to combat
bureaucracy by diminishing the considerable rigidities for starting up a new
business, and the modernization of the educational system concomitantly.
Regarding the latter, the modernization of the educational system provides
practical skills to graduates, cultivates an entrepreneurial culture and, conse-
quently, leads to the embeddedness of entrepreneurship in the Greek society
(Ioannidis 2004: iv-vi; Ioannidis, Politis and Tsakanikas 2005: 100; Ioanni-
dis and Tsakanikas 2006: 112-25; Souitaris 2002; Makridakis et.al. 1997).
Moreover, the fight against corruption could be realized via the rationaliza-
tion of bureaucratic modus operandi. Simplifying and facilitating the proce-
dures of starting up a business leads to lower transaction costs and therefore
enhances the efficiency of the business environment. Hence, it diminishes
the reasons for corruption.
Competitiveness, Entrepreneurship, and the Business Environment 271
Moreover, from the total MNEs that were surveyed, 63.5 percent per-
ceived the corporate tax as a barrier, thus negatively affecting entrepreneur-
ship and the business environment. The examination of the high corporation
taxation rate as an FDI barrier based on the sector that each multinational
belongs to, reveals that there is a difference in the consideration of this bar-
rier on the basis of sectors. Regarding the sectors that each MNE belongs to,
64.3 percent from the industrial/manufacturing sector, 76.9 percent from the
trade/food sector, and 45.5 percent from the banking/services sector argued
that the corporate tax was a significant barrier to enter the Greek market. It
appears again that the banking/services sector is not affected as much by
high corporate taxes for the same reason as explained above, as the regula-
tory framework is mostly determined externally by the administrative bodies
of the EU. Thus, the sector in which the MNEs operate is important in de-
termining whether a high corporate tax is a barrier to entry.
A high percentage of 61.5 percent of the surveyed companies saw the
labor market structure in Greece as an important barrier for their foreign
direct investment projects in Greece negatively affecting entrepreneurship
and the business environment. Furthermore, no significant differences
among business sectors exist: 67.9 percent of MNEs of the industrial/
manufacturing sector and 61.5 percent of the trade/food sector looked upon
labor market structure as a decisive FDI barrier. At the same time, 45.5
percent of the MNEs of the banking/ services sector mentioned the above as
a decisive barrier. Hence, we can underpin that the sector that each MNE
belongs to and the importance of the above barrier as a decisive FDI ob-
stacle are indifferent.
A relatively high percentage (55.8 percent) of MNEs responded that the
Greek legal framework was a significant FDI barrier negatively affecting
entrepreneurship and the business environment. This is consistent with the
suggestions to diminish the barriers that prevent the establishment of busi-
nesses and to implement uncomplicated procedures for starting up a venture,
and also that bankruptcy laws should be modified in the direction of allow-
ing the entrepreneur a second chance (Ioannidis 2004: iv-vi; Ioannidis, Poli-
tis and Tsakanikas 2005: 100; Ioannidis and Tsakanikas 2006: 112-25).
MNEs of the banking/services sector with an extremely high ratio of 81.8
percent referred to the above barrier as significant. Moreover, 57.1 percent
of the MNEs of the industrial/manufacturing sector also saw the Greek legal
framework as a decisive FDI barrier. The percentage was lower somewhat
(30.8 percent) in the food/trade sector. One can conclude that the unstable
legal framework affects mostly the MNEs in the banking/services sector. It
appears that the banking/services sector is mostly affected by the instability
resulting from contradictions created between the Greek legal system and
the regulatory environment determined by the European Commission, the
ECB, and the EMU. This outcome is different from the aforementioned. The
banking/services sector has not mostly been affected by corruption but ra-
ther by an unstable legal framework. Generally speaking, an unstable legal
framework incorporates constant changes in laws, lack of laws, non-
enforcement of laws, discrimination in the enforcement of laws, bureau-
cratic procedures and contradictory laws, and different domestic laws
compared with laws in other Economic and Monetary Union (EMU) coun-
tries; all these inadequacies leave space for corruption.
272 Bitzenis, Marangos et al.
The aforementioned barriers tend to diminish the level of Greek com-
petitiveness. In terms of economic policy, the key factor of “competitiveness
deficit” is that Greek industrial development has been based on increasing
demand, while neglecting policies that would affect supply. Implemented
policies have had the exclusive aim of increasing aggregate demand and, as
a consequence, also raised imports to the exclusion of development of an
export-oriented productive model.
CONCLUSION
In order to determine the motives and barriers of FDI inflows in Greece,
Bitzenis and Tsitouras (2007a; 2007b) and Bitzenis et al. (2009a; 2009b) ran
a survey for the period 1995-2003. The survey was carried out using a ques-
tionnaire, having as a target the biggest foreign investments in Greece. From
the population and via a quota sampling a total number of 150 MNEs was
selected as a target sample and fifty-two multinationals participated, and
thus the response rate was 34.6 percent, consisting of 29.90 percent of the
total Greek FDI inflows during the same period. In this chapter, we use this
survey as a proxy for the level of entrepreneurship and business environ-
ment in Greece and extending the statistical analysis and the critical discus-
sion of the results in order to conclude the main motives and barriers for
FDI in Greece affecting the entrepreneurship and the business environment
in the Greek market. More specifically, in the order of importance, we con-
clude that the prospects for market growth, political stability, economic sta-
bility, the size of Greek market, social stability, and the Olympic Games
2004 were the most decisive factors for a preferable business environment
that favored sound entrepreneurship and competitiveness. The size of the
Greek market is more important for the MNEs in the trade/food and services
sectors than for other sectors due to the proximity of this sector to consum-
ers. The primary barriers in the Greek market reflect an unfavorable busi-
ness environment as well as a deficit in entrepreneurship and competitive-
ness. In the order of importance are bureaucracy, followed by the taxation
system, corruption, corporate tax, the unfavorable labor market structure,
and the unstable legal system. It appears that the banking/services sector is
not affected by corruption as the regulatory framework is mostly determined
by the European Commission, the ECB, and the EMU. However, at the
same time, the framework creates inconsistencies with the Greek legal sys-
tem producing an unstable legal environment negatively affecting the sector.
The chapter contributes to the body of knowledge regarding the level of
competitiveness, entrepreneurship, and the business environment in Greece
by determining the motives and barriers to entry by MNEs in the Greek
market through a questionnaire survey. Prior studies on entrepreneurship in
Greece have concentrated only on domestic players and factors. However,
the globalization process imposes the embodiment of international players
and conditions to derive a more accurate study of entrepreneurship and the
business environment. In other words, this chapter is an attempt to enrich
and incorporate factors of global competition in the appreciation of Greek
entrepreneurship and the business environment in tandem. For that reason,
inward FDI as an additional factor for determining entrepreneurial activity
and the business environment was introduced. In addition, our study investi-
Competitiveness, Entrepreneurship, and the Business Environment 273
gated the relevance of the sector in which the MNE is initiating the invest-
ment in determining the motives and barriers to entry by MNEs. Our find-
ings of the questionnaire survey of fifty-two MNEs that had invested in
Greece, with respondents holding a top position such as Chief Executive
Officer, President, Chief Financial Officer, Chairman, senior management
and/or involved directly in strategic planning, do not reveal a contradiction
with the previous literature, but rather provide a more holistic picture. As
with Greek entrepreneurship, it appears that FDI in Greece during the period
of investigation is also consumer-oriented, and economic, political, and so-
cial stability is valued highly. Meanwhile, as with Greek entrepreneurship,
bureaucracy, corruption, and the legal framework negatively affect FDI. In
extending previous research, our study also revealed that hosting the Olym-
pics 2004 created a positive business environment for FDI, while the size of
the market depends on the sector initiating the investment. Regarding the
barriers to entry by MNEs, the taxation system, corporate taxes, and the
labor market affected negatively the decision to enter, which was not men-
tioned in previous research. Meanwhile, the sector initiating the FDI plays
an important role in determining whether corruption, corporate taxes, and
the legal system are significant barriers to entry.
Issues of concern and limitations with our study is that the investigation
of the motives and barriers of MNEs when investing in Greece has been
done by using questionnaires and interviews of the local managers of the
MNEs’ subsidiaries. The underlying assumption made is that the views of
the local managers will reflect the views of the mother company when de-
ciding to invest. This assumption is not necessarily true. A local subsidiary’s
manager can have a different perception of the domestic environment than
the headquarters’ managers. Also, we discuss the motivations in 2004 when
the research took place whilst an investment might have been made between
1995 and 2004. Given that there is a time difference, the current evaluation
of the local environment from the domestic managers of MNEs does not
necessarily reflect the motivations of the MNE in the past when they entered
the Greek market, at the time when they actually made the decision to invest
in Greece. Our questions were directed at the time that the investment took
place, but the influence of current conditions cannot be avoided. Meanwhile,
as a goal for future research, a full sample should include those MNEs that
considered Greece as an option but at the end opted out in pursuing the in-
vestment; in the case that we investigated the motives proved stronger than
the obstacles. Thus, it can be argued that the sample may be biased. Inde-
pendent of the issues just outlined, we still strongly believe that there is a
contribution to the literature from this novel approach in determining mo-
tives and barriers of FDI in Greece.
Directions for further research, in addition to overcoming the afore-
mentioned weaknesses of our study, should target the impact of the Olym-
pics 2004 on the level of entrepreneurship and the business environment by
identifying whether the momentum associated with the positive outcomes
due to the Olympics was further exploited and changed the business land-
scape in Greece on a permanent basis. Therefore, it can be concluded that it
is crucial for Greece to enhance the motives and reduce the barriers to FDI
so as to stimulate entrepreneurship and create a positive business environ-
ment in order to receive significant FDI inflows. The research reveals that
while the Olympic Games cannot be a motive anymore for FDI, policy
274 Bitzenis, Marangos et al.
makers have to enhance and maintain the momentum after the Olympic
Games by translating the Olympic Games motive into market growth, and
maintaining political, economic, and social stability. Modernizing the edu-
cation system is imperative for the development of skills and fighting cor-
ruption. At the same time, the rationalization of the bureaucratic modus op-
erandi will diminish the reasons for corruption. With regard to the barriers
to FDI of bureaucracy, taxation system, corruption, and the labor market,
there is a need for Greece to adopt a regulatory framework that would reduce
these impediments. In particular, the research reveals that care should be
taken with the banking/services sector. In sum, there is a need for Greece to
modernize and to upgrade state administration by adopting more effective
organizational and governmental policies, to reduce the barriers to entry
and, at the same time, to enhance the motives for entry. Greece needs to
adopt regulatory reforms to foster entrepreneurship, competitiveness, and
create a positive business environment by enhancing and maintaining the
momentum after the Olympic Games.
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