The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation

Abstract

The aim of this paper is to examine the Polish investment attractiveness for foreign investors
from Asian countries in the context of cluster formation. Poland, as a country rapidly growing
in the center of Europe is often chosen as the location for foreign investment and is a place
for localization for more and more industrial clusters. Investment policy, investment incentives,
existing transnational corporations, labor costs and consumer market are just some of
the factors of investment attractiveness of Poland. In the paper it was examined stream of
investment from Asian countries and the factors influencing the choice of Poland as a suitable
place for the location of the production and service subsidiaries of Asian transnational
corporations and the possibilities for creating and joining industrial clusters in Poland.

Full text

Asia-Pacific Journal of EU Studies Vol. 14 No. 1 93
The Attractiveness of Poland for Asian Foreign
Direct Investments in the Context
of Clusters Formation1
ANNA H. JANKOWIAK*
Department of International Economics Relations, Wrocław University of Economics, Poland
The aim of this paper is to examine the Polish investment attractiveness for foreign investors
from Asian countries in the context of cluster formation. Poland, as a country rapidly grow-
ing in the center of Europe is often chosen as the location for foreign investment and is a place
for localization for more and more industrial clusters. Investment policy, investment incen-
tives, existing transnational corporations, labor costs and consumer market are just some of
the factors of investment attractiveness of Poland. In the paper it was examined stream of
investment from Asian countries and the factors influencing the choice of Poland as a suit-
able place for the location of the production and service subsidiaries of Asian transnational
corporations and the possibilities for creating and joining industrial clusters in Poland.
Keywords: Foreign Direct Investment, Poland, Investment Attractiveness, Clusters
I. INTRODUCTION
Maximizing profit is the dominant motive of the internationalization of
enterprises in the global economy. Following this motive, multinationals
are looking primarily for new markets for their goods or services and reso-
urce markets, however, resources are not currently understood only as a
cheap labor and raw materials, but the production capacity and highly
qualified workers and managers. Corporations seek to achieve a competi-
tive advantage in the new markets and to increase the efficiency of its op-
erations. Companies which place their units in different countries, are
guided by countries investment attractiveness. The concept of attractive-
ness can be interpreted in different ways and sometimes it is a subjective
evaluation of each investor. Enterprises decision to start operation in the
* Wrocław University of Economics, Poland, Faculty of Economic Sciences, Department of
International Economic Relations, Poland; E-mail: anna.jankowiak@ue.wroc.pl

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
94
international market is driven by diverse factors. It is extremely difficult to
indicate an universal motives, because they are not always the result of
rational economic thinking, often influenced by factors difficult to meas-
ure and different for each company. Economic, social, political, infrastruc-
ture and even cultural differences are taken into account, which affect the
way the business is done in the country.
The aim of this paper is to examine the Polish investment attractiveness
for foreign investors from Asian countries in the context of cluster forma-
tion. Poland, as a country rapidly growing in the center of Europe is often
chosen as the location for foreign investment and is a place for localization
for more and more industrial clusters. Investment policy, investment in-
centives, existing transnational corporations, labor costs and consumer
market are just some of the factors of investment attractiveness of Poland.
In the paper it was examined stream of investment from Asian countries
and the factors influencing the choice of Poland as a suitable place for the
location of the production and service subsidiaries of Asian transnational
corporations and the possibilities for creating and joining industrial clus-
ters in Poland.
There are following research questions in the paper: (1) what factors in-
dicate investment attractiveness of countries; (2) what are the advantages
of Poland among other countries in terms of investment attractiveness; (3)
whether the clusters can be part of the investment attractiveness of the
national economy and (4) which Polish clusters could be attractive to for-
eign investors from Asian countries.
II. ATTRACTIVENESS OF COUNTRIES IN THE CONTEXT
OF FOREIGN DIRECT INVESTMENT AND CLUSTER-
ING-THEORETICAL APPROACH
1. Foreign Direct Investment as a Transfer of Capital between
Countries and Companies
According to the definition of OECD, foreign direct investment is a type
of investment aimed at holding a long-term control by a resident entity in
one economy (foreign direct investor) in an enterprise resident in an econ-
omy other than the economy of the foreign direct investor (FDI enterprise).
The investor is to gain permanent benefit due to long-lasting influence on
the management of the FDI enterprise. The minimum number of shares
held in a given enterprise is 10%; however, the influence on management,
with such level of shares, may be exerted only if the other shares are
highly dispersed (OECD, 2008, p. 234). In order to make foreign direct

ANNA H. JANKOWIAK 95
investment by an enterprise, three basic conditions must exist, which gave
the basis for J. H. Dunning’s formulation of the eclectic theory of foreign
direct investment. He joined the theory of monopolistic advantage (that
explains why the investments are made outside the territory of the country
of origin but does not indicate why these investments are located on spe-
cific markets), location theory (that explains why FDI is made on specific
markets without giving the reason why investments are made) with the
theory of internalization (that explains the mechanisms of using benefits
by the enterprise from making the foreign investment). OLI paradigm was
made on this basis (OLI meaning ownership, localization, internalization).
An enterprise will transfer capital-in the form of foreign direct invest-
ment-under the following conditions:
•a company must display specific advantages that result from the re-
sources and abilities, which make the company competitive on the in-
ternational market,
•a company should use the competitive advantage it has gained by es-
tablishing its own structures on foreign markets, not to transfer it by
selling (e.g. licenses),
•a company should join its own advantages with the advantages of the
location market, meaning it should effectively use the advantages of
given location in order to maximize its own profits (Biznes, 2000, p. 79).
According to the above-specified OLI paradigm, making foreign direct
investment at a given moment should be conditioned by the configuration
of the three forces specified above. Enterprises will enjoy various advan-
tages that result from the specific character of their operations, the coun-
try of their origin and the country of the target investment (Dunning,
2001, p. 176). The first two factors closely depend upon the capabilities
and resources of the company, the third factor decides about the direction
of transferring the capital in the form of FDI.1
2. Determinants of Countries Attractiveness
Investment attractiveness of the country is very broad and differently
interpreted. For the purposes of this paper the term investment attractive-
ness will be understood as the ability of the country (region) to attract
foreign investors and promote the necessary conditions for further devel-
opment. Attractiveness therefore causes activation of the growth process,
1 See more in A. H. Jankowiak, Partnership through Investment- Chinese Foreign Direct
Investment in CEE Countries, in: ed. J. Wardęga, China- Central and Eastern Europe Cr
oss-Cultural Dialogue. Society, Business and Education in Transition, Kraków 2016.

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
96
based on the diverse factors. On one hand, the investment attractiveness
can be measured by economic indicators, on the other hand, it is often a
subjective assessment of the investor, which may be guided by non-eco-
nomic factors (e.g. their needs, knowledge of the country, a subjective
feeling to the inhabitants of the country etc.).
M. Geldner indicates as an important determinants of incoming foreign
direct investment in the host country: the cost of production in the coun-
try, including the crucial labor costs, marketing factors expressed by the
size and dynamics of the market, growth stage, and the existing competi-
tion, trade restrictions, including tariff and non-tariff barriers, as well as
transport costs constitute natural barriers to trade, state policy, namely
the creation of the so-called investment climate, through the stability of
the political system, social conditions and the degree of economic devel-
opment (Geldner, 1986, pp. 82-85).
FIGURE 1. HARD AND SOFT LOCATION FACTORS
Source: Grabow, B., D. Henckel, and B. Hollbach-Groemig, Weiche Standortfaktoren,
Schriften des Deutschen Institut für Urbanistik, Stuttgart-Berlin-Köln 1995, p.
65, Bezpośrednie inwestycje zagraniczne w Polsce (Foreign direct investment in
Poland), ed. Z. Olesiński, PWE, Warszawa 1998, p. 220.
A more detailed breakdown of location factors was presented by B.
Grabow, D. Henckel and B. Hollbach-Groemig. According to this theory
the factors can be divided into those with a readily measurable (so-called

ANNA H. JANKOWIAK 97
hard factors) arising from business operations and those difficult to meas-
ure, not associated with the direct activity of the company (so-called soft
factors). The set of factors is presented in Figure 1.
Soft and hard factors are crucial in the different phases of the decision
about the location of investment. Initially, e.g. the economic image of a
business location in the eyes of the investor is more important (soft factor),
then in the next phases of decision making process, other factors like sup-
ply of skilled labor are more crucial (hard factor). Placement of various
units of the company to the individual national markets is beneficial for
the company, because it allows to maximize profit and minimize risk, thus
increasing the company’s competitiveness. As rightly said Sean Maloney,
executive vice president of Intel Corporation “(…) this global structure
ensures our closeness to our customers, helps diversify risks in case of re-
gional emergencies and allows us to tap into a talented workforce with a
variety of skills around the world. Indeed, to optimize global competitive-
ness, it is important to locate manufacturing and other facilities around
the world” (Speech, 2005, p. 2).
One of the factors to be included in the group of investment attractive-
ness factors and which are relevant to the aim of the paper, is the possibil-
ity of the location of companies in the industrial cluster. An important
activity for some companies, particularly smaller ones, which are usually
providers, is the possibility for locate their units in a newly created or ex-
isting regional clusters. This action is aimed at reducing barriers of entry
into the region, reducing the cost of inputs and facilitated the start of ac-
tivity, because clustered companies work closely together. The existence of
the cluster in the region is also important information for the company
with specialization in a particular field of production. There are already
factors of production, skilled labor force, distribution channels, suppliers,
know-how and strict business relationships with scientific institutions and
research centers. The existence of the cluster can be therefore a factor in-
creasing the investment attractiveness of the country or region.2
Theoretical aspects of attractiveness factors are shown in a table 1. Later
in this paper factors presented in the table 1 will be transferred into Polish
investment attractiveness in the light of attracting investors from Asian
countries, who have the ability to locate their units in industrial clusters
existing in Poland.
2 See more in A. H. Jankowiak, Lokalizacja w klastrze jako motyw internacjonalizacji
przedsiębiorstw (Location in the cluster as the motive of internationalization of en-
terprises), Research Papers No. 369 of Wroclaw University of Economics, Wroclaw,
2014, pp. 263-271.

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
98
TABLE 1. FACTORS OF INVESTMENT ATTRACTIVENESS
Factor Details
1 Location
•Availability of transport (near the hub and transport routes, sea
routes, ports, airports, etc.)
•The central geographical location (ease in reaching the country,
the position of the border etc.)
•Landform
•Availability of land
•Road infrastructure
2 Human capital
•Resource of workforce
•Education of labor
•Mobility of labor
•Work productivity
•Cost of labor
•Willingness to learn
•The education system, colleges, vocational schools
3 Demography •The age structure of society
•Birthrate
4 Economic
indicators
•GDP and GDP per capita
•The unemployment rate
•The sectoral structure of the economy
•The structure business ownership
•The number of SMEs and corporations
5 Market
•Absorption sales market
•The number of domestic consumers
•Market competition
6 Culture and
lifestyle
•Openness to other nationalities
•Tolerance society
•Knowledge of foreign languages in society
7 Innovativeness
•The ability to produce the innovation
•The presence of innovative technologies and business
•Innovation policy of the state support of innovative actions
•The innovative potential of industry and labor
•Existing research - development units, specialized laboratories
8 Domestic and
foreign policy
•Political Stability
•The overall situation in the country
•Security in the country
•The performance of public institutions
•Membership in international organizations
•Membership in the integration groups (preferential tariffs, har-
monization of laws, and access to such funds. EU funds)
•Promotion of the country in the international arena
•Political risk
9 Economy
•Special economic zones
•Investment incentives (tax breaks, subsidies, preferential land
prices)

ANNA H. JANKOWIAK 99
•Investment climate
•The presence of other foreign investors
•Efficiency investor service
•Export and its structure
•The tax system
•The rules and transparency
•Economic risk
•Domestic
•Expertise of the local and national economy
10 Clusters and
business networks
•Clusters with an established position in the economy
•Potential clusters
•Cluster policy
•Existing enterprise networks
•Technology parks
11 Other •The subjective experience of the investor
•Fortuity
Source: Author’s own work.
3. Clusters as a Form of Cooperation in the Global Economy
In the modern, global economy, companies face many challenges. They
are exposed to enormous competition operating in the international mar-
ket and hence the cooperation with others is crucial for their development.
An example of such interactions are clusters. However clusters are not a
new phenomenon, more and more companies choose to operate in a clus-
ter, recognizing many benefits from it. Clusters operating in Europe are
based on specific models, which were also adopted in North America and
partly in Asia. Clusters are interconnected companies and national institu-
tions, aiming to increase competitiveness, increase innovation, and create
new products, new businesses and new jobs. Clusters, by the specificity of
their character, combine regular business operations, local government
agencies and scientific entities, thus contributing to the rapid growth of
the local economies. Clusters also give an opportunity for many small and
medium-sized companies operating locally to start international activities.
Therefore they constitute a good business environment, which drive eco-
nomic growth. Clusters are present in most national economies, but they
reach a various stages of development in the different economic conditions.
Despite many theoretical or practical analyses of clusters, there are no
generic models that can explain the success or decline of some clusters.
However, the advantages of this phenomenon were recognized and that is
one of the main reasons for the current focus on clusters. The final shape
of the cluster is affected by a number of factors, which are indirectly and
directly related to the location. The globalization has opened many possi-

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
100
bilities previously unknown for companies. Transnational corporations
became the main actors. The activities on the international market are
simple than ever, but at the same time the companies are facing interna-
tional competition. Formation of clusters combines forces of many compa-
nies in a more or less formal structure, clusters need to be understood as a
combination of companies cooperating and competing at the same time.
According to M. Porter’s definition “clusters are geographic concentra-
tions of interconnected companies, specialized suppliers and service pro-
viders, firms in related industries, and associated institutions (e.g. universi-
ties, standard agencies, and trade associations) in particular fields that
compete but also cooperate” (Porter, 2001, 246). An industrial cluster
consists of six main components. The most important is the industry, un-
derstood as small and medium enterprises, but also a large multinational
corporations and their suppliers, customers etc. Public bodies and univer-
sities are also important because they form the core of the cluster. Addi-
tional role is played by funding and supporting agencies and the media,
job of which is to inform about the activities of clusters and to promote
their brands. It should be noted that this is a model form of cluster. Those
six components will not be found in every industrial cluster. Each cluster
is different, due to the variety of influencing factors.
M. Porter’s definition is the most common in the literature, but not the
only one. R. Rabelotti highlights the specific relationship between the
companies in the cluster-there are links between companies market and
non-market relations resulting from the exchange of goods and informa-
tion. The behavior of individual companies is determined by the sense of
connectedness and community with other companies from related sectors,
operating in this location. M.P. van Dijk and A. Sverisson broaden the
definition of a cluster of issue related to the value chain-dense network of
companies and organizations, which value chains are linked, and those do
not always result from transactions (Gorynia and Jankowska, 2008, pp.
34-35).
It is assumed that an industrial cluster may arise in a particular location,
if:
•there is a large concentration of small and medium-sized enterprises,
•small and medium-sized companies from the location and surrounding
are relatively homogeneous and belong to the same market segment,
•there are strong and long lasting relationships of different nature be-
tween businesses,
•companies existing in the system have access to business and non-
business services,

ANNA H. JANKOWIAK 101
•there is a common culture, especially industrial culture - a characteristic
for the region type of product, production technology, type of contacts
between economic operators (Fabrowska and Halicki, 2009, p. 8).
Clusters differ on a number of dimensions:
•some clusters are well-established whereas others are just emerging,
•large and dense clusters with a multitude of related industries, associ-
ated organizations and institutions as opposed to thin and smaller clus-
ters,
•manufacturing-oriented clusters such as automotive versus more ser-
vice-oriented clusters such as financial services,
•science-driven clusters and clusters in traditional sectors,
•clusters with strong external linkages and global reach (“hot spots”) as
opposed to clusters with a mere regional reach (Ketels et al., 2008, p. 3).
The benefits of the clusters can be viewed at different levels and planes.
The connections may be beneficial for both companies, as well as industry,
public sector, region and even the state. All entities associated in a cluster
achieve mutual benefits. Without that there would be no economic coop-
eration reasons. The mutual benefits of working in a close cooperation
with companies, research units and local authorities should include a com-
mon knowledge that comes from learning from each other. The knowl-
edge may concern the conditions of operation on the market, knowledge
of the political environment, social development, the current economic
situation on the market, and possible economic trends. The cooperation in
the cluster provides a platform for exchanging knowledge and experiences
of all individual units. R&D is a very cost-intensive part of the business of
each company, hence the division of investment in coming up with better
solutions can help to enhance the competitiveness of all cluster partici-
pants. The sources of knowledge can be also found in joint training, prac-
tice, information exchange, development of standards such as the human
resources policy. The existence of strong research units in the cluster is
necessary, because it has a direct impact on the innovation in cluster,
manifested in new products, processes, services and business models. Clus-
ter participants may also make joint investments, joint purchasing and
have a common distribution network. Any increase in the amount of pur-
chased goods from one supplier creates a downward pressure on the prices,
hence the common, larger purchases may translate swap into a reduction
of production costs or the cost of administration. Furthermore, joint mar-
keting is mutually beneficial for all players.

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
102
Exemplary benefits for cluster companies are as follows:
•exchange of information about the technology;
•exchange of information about the market;
•common best practices;
•development of cooperation in selected business projects;
•development of cooperation in joint operations in a given market;
•strengthening of an entrepreneurial spirit;
•facilitated access to financing, resources and infrastructure;
•reduction of time needed to enter the market (Innobarometer, 2006, p.
30).
III. ATTRACTIVENESS OF POLAND FOR ASIAN
COMPANIES
One of the aspects of the modern economy is the flow of capital in the
form of foreign direct investment between countries. Investors choosing
suitable locations for their businesses in the host countries, look at broad
spectrum of factors and amenities offered by the destinations for this type
of investment. The following factors are taken into account: the costs of
labor, its availability, performance and mobility, availability of raw mate-
rials, proximity to final customers, transport infrastructure, as well as fac-
tors related to the policy of the country, such as belonging to the integra-
tion groups and investment incentives offered to potential investors. Most
of the direct investment capital comes from developed countries, but more
and more often their sources and roots are in in developing countries,
mainly in Asian economies.
To analyze Polish investment potential in terms of investment attrac-
tiveness, the set of factors described earlier in this paper can be used. Fac-
tors from the location group are undoubtedly elements that prove the ad-
vantage of Poland. The country is located in the central part of Europe,
making it easy to reach from many parts of the world. Poland is located
on a number of transport routes, has a network of highways connecting
the east and west and the sea ports of the Baltic Sea. Every major city of
the country is located near the international airport, which is crucial not
only because of the possibility of transporting goods, but also to facilitate
the conduct of international business. The location is an advantage of Po-
land, especially in the context of Chinese strategy. The new initiative cre-
ated by Chinese government in 2015 “One Belt, One Road” is supposed
to open the possibilities for Chinese investors to go global. The scale of

ANNA H. JANKOWIAK 103
Chinses investments in Europe will change and that is the opportunity for
Poland and other countries from Central and Eastern Europe. Foreign di-
rect investment is one of the most important areas of potential develop-
ment in bilateral relations. Investment relations between China and CEE
countries are expected to develop, based on the announced strategy of
Chinese central authorities towards this region.
Human capital is another group of factors positively influencing the in-
vestment attractiveness of Poland. On one hand, still there is preferred
number of labor force, and on the other hand, the cost of operating hours
is lower compared to the EU average (Figure 2). In the year 2015 hour of
work in Poland cost 8.6 EUR, while the average for the European Union
was 25 EUR. In the European countries, the highest salary had to be paid
in Norway (51.2 EUR), followed by Denmark (41.3 EUR) and Belgium
(39.1 EUR). Employee earns the lowest amount in Bulgaria (4.1 EUR)
(Bourgeais and Iscru, 2016), but the pace of wage growth in this country
is much higher than the rate in Poland. Analysis of the data shows that
the cost of labor in Poland is a strong argument for investment attractive-
ness, especially imposing on the data the level of education and the know-
ledge of foreign languages. In the years 2008-2014 in Poland the number
of graduates of technical collages increased by 41% (Made in Poland, 2016,
p. 9), which shows the changes in the profile of the graduates of higher
education institutions in Poland. Population growth and demographic
structure in Poland is unfortunately a growing problem, but against west-
ern part of Europe, the Polish society is not aging at such a dynamic pace.
FIGURE 2. HOURLY LABOR COSTS FOR THE WHOLE ECONOMY IN EUR IN 2015
0
10
20
30
40
50
60
EU-28
EU-19
Norway
Denmark
Belgium
Sweden
Luxembourg
France
Netherlands
Finland
Austria
Germany
Irelan d
Italy
United Kingdom
Spain
Slovenia
Cyprus
Greece
Portugal
Malta
Estonia
Slovakia
Czech Republic
Croatia
Poland
Hungary
Latvia
Lithuania
Romania
Bulgaria
Wages & Salaries Other costs
Source: Bourgeais, V. and F. Iscru, Labor costs in the EU, Eurostat Pressrelease, 61/2016-1
April 2016, http://ec.europa.eu/eurostat/statistics-explained/index.php/Hourly_la
bour_costs.
Polish attractiveness can be viewed in two ways, depending on the

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
104
strategy adopted by the foreign investor. If an investor is looking for a
convenient location only for production, while the target markets are in
Western Europe3 so Poland, is an attractive place for foreign investors
who can use the facilities of trade resulting from membership in the Euro-
pean Union. On the other hand, in Poland, there live 38 million consum-
ers, who create a potential market for the products offered by the investor.
The competition in the market is not as well developed as in the highly
developed countries of Western Europe, which is crucial in industries with
a high degree of innovation.
Undoubtedly, factors of elevating the level of attractiveness are the
economic indicators of the national economy. Constantly (even during the
crisis in Europe), increasing GDP growth (at approx. 3%-Figure 3) shows
the good condition of the Polish economy. Country strengthens its leading
position in Central and Eastern Europe and can successfully compete with
Western European countries. Poland also features a stable economic policy,
low economic risk and the conscious and deliberate policy of attracting
foreign investors. Polish regions, through the activities of special economic
zones offer a range of investment incentives, exemptions from income
taxes and investment, preferential conditions for investment, employment
grants, grants for training etc., which directly affect the attractiveness and
competitive position of Poland.
FIGURE 3. THE PERCENTAGE CHANGES OF GDP IN POLAND AND IN THE EURO
ZONE IN THE PERIOD 1997-2016
4.2
7.2
3.9
2.6
3.7
4.8
1.8 1.7
3.3 3.5 3.5
2.3 3
0.5
-4.5
21.6
-0.8
0.5 0.9 1.5 1.6
-6
-4
-2
0
2
4
6
8
1997-2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
Poland Euro Zone
Source: Polish Information and Foreign Investment Agency, http://www.paiz.gov.pl/pols
ka_w_liczbach/gospodarka.
3 An example might be the Korean company LG, which has invested its production in
Poland, and 98% of goods are being exported to the market in Western Europe (mainly
Germany, the UK and Spain).

ANNA H. JANKOWIAK 105
Year by year Poland becomes more attractive for foreign investors, who
move their production or services to countries with better conditions.
Asian corporations are active investors in Poland. This is especially clearly
visible in the region of Lower Silesia, where LG and Toyota are located.
Asian capital is significant for the development of the region. The presence
of foreign investors from Asian countries in the studied region enhances its
attractiveness in the eyes of following foreign companies. Good economic
results of the primary investors attract high-tech specialized suppliers to
the region. Profile of production of the Asian companies is also very im-
portant. These are the most technologically advanced goods and electronic
products, which stimulate technological progress and long-term economic
and social development. The development of the electronic sector im-
proves the international competitiveness of the country and the region and
stimulates the development of other sectors of the economy with high
economic potential (Gospodarka, 2016).
TABLE 2. FOREIGN DIRECT INVESTMENT INWARD POSITION FROM ASIAN
COUNTRIES IN POLAND AT THE END OF 2014 (IN MILLION USD)
Country Foreign direct investment inward Number of entities
China 179,3 884
Hong Kong (China) 263,5 27
India 45,4 130
Indonesia 1,0 <10
Japan 1 057,8 292
South Korea 912,3 144
Malaysia 17,7 <10
Philippines -0,6 <10
Singapore 25,7 20
Sri Lanka 0,1 <10
Taiwan 17,4 <10
Thailand 10,3 <10
Vietnam 10,5 353
Total Asian countries 2 528,7
Source: Author’s own work based on National Bank of Poland, Zagraniczne inwestycje
bezpośrednie w Polsce w 2014 r. (Foreign Direct Investment in Poland in 2014)
and Central Statistical Office, Działalność gospodarcza podmiotów z kapitałem
zagranicznym w 2014 r. (Economic activity of entities with foreign capital in
2014), pp. 58-61.
Investment attractiveness of Poland presented above has led many
Asian companies to locate their foreign investments. The cumulative value
of the investment in 2014 (Table 2) was the highest for the Japanese capi-

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
106
tal (1,057 million USD) and South Korean (912.3 million USD) (Central,
2014, pp. 58-61). Investors from China (including Hong Kong), as well as
India and Singapore, were also active, although the share of those inves-
tors is not as evident as in the case of European investors.
The most active investors from the group of Asian investors are the
ones from China and Japan. According to the data at the end of 2014 Po-
land had more than 800 companies with Chinese capital. It should be
noted that Chinese investment in Poland is only about 0.25% of all in-
vestments in the country, thus, Poland is just being discovered by Chinese
and other Asian companies. The type of investment made by the Chinese
companies is also different. There are not greenfield investments (i.e.
building factories or warehouses from the beginning), but Chinese inves-
tors focus their attention primarily on mergers and acquisitions, which
often do not exceed 10% of the share capital. Among the larger Chinese
corporations that are present in Poland, there may be mentioned: TCL
Operations (LCD production), GD Poland (distribution center), Min
Hoond Development (real estate), Huawei Technologies (IT), ZTE (IT),
Victory Technology (LCD production), China Minmetals (cooper) (Po-
land’s Position, 2011, p. 17) (Figure 4).
FIGURE 4. THE MAP OF MAIN CHINESE FDI IN POLAND
Source: Poland’s Position as a Business Partner for China, KPMG Transaction Services in
cooperation with Chinese Embassy, Ministry of Economy and Polish Information
and Foreign Investment Agency, 2011, p. 17.
Japanese companies are located mostly in south and central part of Po-

ANNA H. JANKOWIAK 107
land. The industrial (sectoral) specialization is clearly seen. The significant
percent of Japanese companies in Poland is from the automotive industry.
Those companies don’t produce final products in the country, but parts
and components needed to the vehicles. The leading company is Toyota,
who is surrounded by many smaller Japanese companies. There are also
Bridgestone investment, Danfoss Saginomiya, YKK Poland, Lotte Wedel
etc. (Figure 5).
FIGURE 5. THE MAP OF MAIN JAPANESE FDI IN POLAND
Source: Embassy of Japan in Poland, www.pl.emb-japan.go.jp.
Both Asian foreign investments made in Poland, as well as investment
strategies of Asian countries (e.g. new silk road) are a chance for the coun-
try and may lead to a broader flow of FDI into Poland. Entering the mar-
ket of western countries of the European Union is much more cost-
intensive and riskier, thus, the entrance to a country like Poland may be
some sort of a test drive, testing on the road to a more technologically
advanced and innovative markets.
Poland is not the only country in Central and Eastern Europe that at-
tracts foreign investors from Asian countries. Government agencies for
inves tments from other countries of the Visegrad Group (Poland, Hun-
gary, the Czech Republic, and Slovakia Republic) are dynamically active in
the process of attracting foreign investors. Investors often choose the other
three countries, besides Poland, as a destination for investment. In Hungary,

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
108
investors from China are particularly active, while in Slovakia, among Asian
investors, dominate investors from South Korea. On the background of
Visegrad Group Countries, Poland is the largest recipient of Japanese and
Chinese investment. It is worth considering the attractiveness of the Polish
advantages that distinguish the country from the rest of Visehrag Group
Countries, and which have not been previously discussed:
•The size of territorial and geographical proximity to Western Europe.
•The diversity of the population with varying degrees and profile of edu-
cation, which is important both for productive investment and invest-
ment based on new, innovative technologies.
•Decentralization of the country-in the contrast to the rest of countries
of the group in the capital city (Warsaw) lives less than 8% of the Pol-
ish population. In the country there are a few large cities, which are
separate production and scientific facilities, which allows investors to
find a convenient location.
•The status and development of higher education-Poland is the only
country in the region that can boast of having two universities at the
Shanghai List, which shows the quality of higher education and qualifi-
cations of the employees with higher education.
•Poland is well evaluated by experts and entrepreneurs themselves-in
2016 Poland took first place in the 11th edition of Polls prepared by
Polish-German Chamber of Industry and Commerce (AHK Poland),
carried out in collaboration with twelve bilateral chambers in Poland
with a group of International Group Chambers of Commerce (IGCC).
Poland has been identified as the leader of the list (maintained its posi-
tion from 2015) among the countries of Central and Eastern Europe
and is the preferred destination for foreign investors. Polish received 4.6
points out of 6, Czech Republic took second place with a score of 4.4
points, and the third was Slovakia (4.3pts). Among the factors that
rated Poland on the highest position against Visegrad Group Countries
can be pointed: factors relating to the quality of personnel: qualifica-
tions, quality of academic training and productivity and motivate em-
ployees, supplier base in Poland, the infrastructure and the state of the
Polish economy (Badanie, 2016).
IV. INDUSTRIAL CLUSTERS IN POLAND AS A SOURCE
OF INVESTMENT ATTRACTIVENESS FOR ASIAN
COMPANIES
Another factor increasing the investment attractiveness of the country

ANNA H. JANKOWIAK 109
is the presence of industrial clusters in different regions. The existence of
the industrial cluster in a given territory can facilitate the market entry for
other companies. In the region, there is already adequate primary and sci-
entific infrastructure from which company can reap the benefits immedi-
ately, without unnecessary waiting to provide the basic elements required
by the investor (such as roads, electricity supply etc.). The rate of return
on such investment can therefore be quickly obtained. On the other hand,
the existence of the industrial cluster determines the specialization of in-
dustry entities located there. An investor looking for places for new sub-
sidiary can see the investment potential of the region in a particular indus-
try. If the investor is a supplier (or buyer) therefore the location in close
proximity to an industrial cluster of customers (or suppliers) is economi-
cally justified. The industrial cluster specializes in the production or ser-
vices also provides proximity to research and development centers, special-
ized employees, suppliers, as well as the services of local authorities aimed
at a specific industry. The existence of the industrial cluster can thus be a
positive aspect of the location.4 Strong brand of cluster in conjunction
with a conscious regional policy can affect the image of the region in the
eyes of potential investors. It should be noted, however, that highly spe-
cialized local cluster can also be provided limiting in the development
process. Operating costs (e.g. the purchase of real estate) are much higher
in developed industrial clusters, so that barriers to entry are significant.
Specialization in a particular industry restricts the inflow to the region
other industries that do not have the factors necessary for the functioning
and development. In most examples of the existence of the industrial clus-
ter can, however, have a positive impact on the investment decisions of
economic entities, although each case must be considered individually.
The phenomenon of clustering in Poland is relatively new, though the
country has several strong regional and sub-regional industrial clusters.
Currently in Poland there are 134 clusters (and 104 entities of an Indus-
trial cluster character or a potential clusters-see Figure 6), which is not a
significant achievement compared to most European countries. However,
worth mentioning is the age of the Polish industrial clusters. More than
60% are young clusters that developed in the years 2011-2015. The aver-
age age of the industrial cluster in Poland is four years (Buczyńska et al.,
2016, p. 7). Based on these data it can be concluded that the industrial
clusters in Poland are only in the initial phase of development.
4 An example of the beneficial effects of the investment attractiveness of the cluster is
Silicon Valley in the US, where the brand resulted in increased investment activity.

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
110
FIGURE 6. GEOGRAPHICAL DISTRIBUTION OF INDUSTRIAL CLUSTERS
IN POLAND
Source: G. Buczyńska, D. Frączek, P. Kryjom, Raport z inwentaryzacji klastrów w Polsce
2015 (Inventory Report on clusters in Poland 2015), Polska Agencja Rozwoju
Przedsiębiorczości (Polish Agency for Enterprise Development), Warszawa 2016,
p. 16.
From the point of view of a foreign investor, industry specialization of
individual clusters is important. In Poland, there are industrial clusters of
both traditional and high technology industry. Most industrial clusters
operate in the field of modern technology (19 out of 134 Polish industrial
clusters). The second sector is energy (16 clusters) and construction (12
clusters) (Buczyńska et al., 2016, p. 34). This statistic applies only to for-
mal clusters that have been identified and which fulfill all the require-
ments of the theoretical approach. It is worth noting that in Poland there
are many clustering structures, which operate on similar principles as clus-
ters, but doesn’t have a formal character. An example of such an organiza-
tion may be automotive industries, which effectively operates in Poland,
and in addition is a part of a larger cluster in Europe. In Poland these
structure isn’t formalized and is only at the initial phase of creation, but fit
into the larger picture of supra-regional industrial cluster. Placement of
investment from the automotive industry in Poland provides access to the
cluster, while at the same time allows access to competitive factors of pro-
duction, even in the form of cheaper labor, which was presented earlier in
this paper.
As it was mentioned before, the specialization of Asian FDI in Poland
can be seen. It is hard to recognize in the case of Chinese companies, but
Japanese firms belong to automotive sector and Korean companies to
LCD production. This is strongly important in the context of clustering.

ANNA H. JANKOWIAK 111
Both groups of investors (from Japan and Korea) are operated in clusters
or in some clusters initiative. Asian foreign direct investments in the south
part of the country are concentrated around the two leading companies.
One is the Korean company LG, which brings together manufacturers and
suppliers of parts and components for the production of LCD TVs. Second
group is formed by companies directly or indirectly linked to the Japanese
Toyota. The character of those two cluster is different, but the common
feature is a close cooperation and origin of companies. In the LCD clusters
Korean companies are surrounded mostly by Korean firms who cooperate
with Polish entities. The cluster is less open for the environment, due to
the fact that there is no similar production nearby. The automotive cluster
connected with Toyota, is rather open for local and foreign companies. It
is apparent from the fact that only in the south region of Poland there are
located about 300 automobile companies and what is even more funda-
mental for growth, Polish automotive cluster is a part of huge European
automobile cluster, where the biggest and the strongest companies are
located. That is a potential advantage for next investors from this sector. If
they decide to locate in Poland in one of industrial clusters they will get
not only the access to Polish market but to European market as well, us-
ing all the attractiveness factors that Poland can offer to them.
The role of Asian clusters located in Poland may be observed in the
formation of economic relations on the national level. Effect on the rela-
tionship between Europe and Asia is multifaceted. Clusters attract new
investors to the region and the country. In both clusters, core companies
are surrounded by smaller supply units. Thus, transnational companies
investment resulted in a decision of other companies to follow the path-
finder. As a consequence Asian clusters were formed. Toyota cluster in-
creased the attractiveness of the particular location. Toyota therefore set
an example for other corporations and made it easier for them to make a
decision on the location in Europe. In addition, cooperation in the Euro-
pean supply chain provides them with ongoing development and recipi-
ents of manufactured goods.
V. EMPIRICAL STUDIES ON THE SELECTED CLUSTER OF
ASIAN COMPANIES IN POLAND
Empirical research of cluster participants from Asian companies in Po-
land is based on models and conclusions drawn from the analysis of the
theoretical operation of clusters in the modern global economy. As the
method of survey of Asian investors grouped in a cluster, the In Depth
Interview (IDI) was selected. The survey was conducted among senior
management of individual companies in the group. IDI study form im-
poses a predetermined scenario, however, it provides a lot of flexibility in

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
112
conducting a conversation with the respondent, allowing to get to know
the real opinion of the person tested. This method is used in case of a rela-
tively small group of respondents. In-depth interviews allow to reach the
most important issues from the point of view of the test subject so this
method allows the identification of relationships in the cluster from the
manager’s point of view. The selected method enables to see the compre-
hensive review of the location in the selected cluster. The tool used in the
study was a questionnaire. The respondents answered two questions about
the motives of the location choice. The samples for qualitative research
was targeted and not random, which allowed to reach a group of persons
with full knowledge of the relationships and processes occurring in the
cluster. The study included 12 of the 16 cluster companies. In the study
did not participate companies constituting the core of the cluster, and
which have created a cluster in the region, because those companies fol-
lowed different factors in the decision process.
The first issues discussed in conversation with the test group of Asian
investors were the reasons for the location of investment in the studied
region. Respondents were asked to indicate which of the factors were a
pivotal in investment decisions and which of them didn’t have any impact
or the impact was moderate (see Figure 7).
FIGURE 7. WHY DID YOU DECIDE TO LOCATE COMPANY IN THE REGION?
12
9
6
6
7
3
5
8
7
0
2
7
6
3
2
1
0
6
1
7
4
1
2
0
2
2
1
2
5
4
4
5
5
3
3
3
1
0
2
2
1
0
4
1
1
03691215
The presence of dominante company in the region
Law regulations
Cluster existing in the region
Special economic zones
Access to EU market
Well qualified w orkforce
Relatively cheap labor force
Tax exemptions
Strategic location in Europe
The do mestic mar ket
Local universities and higher education
Potencial of the market
Infrastructure of the region
Other
main factor huge impact medium impact low impact no impact
Source: Author’s Own Research.

ANNA H. JANKOWIAK 113
Representatives of the cluster indicated the presence of a dominant com-
pany in the region, as a key factor in investments in the region. All sur-
veyed selected the answer indicating whether that was the main condition
for making investments in the region. The second most popular option
was the existence of a specialized cluster in the region-9 respondents indi-
cated this factor as a major, and 3 noticed big impact. Another strong
factor in attracting investors was a strategic location in Europe (including
12 affirmative answers), the existence of special economic zones and the
access to the European Union sales market (including the 12 positive an-
swers).
Respondents also evaluated a large impact on factors such as tax exem-
ptions (5 marked a huge influence on their location decisions), significant
potential (8 answers) and the good infrastructure of the region (including
9 responses). Regulations have been identified as hardly important in the
decision-making process, as well as the domestic market, which 8 of re-
spondents rated as insignificant factor location. In terms of workforce, its
cost and qualification, prevailed responses indicating a moderate impact
on location decisions (8 responses). Based on the analysis of the number of
responses emphasizing the high impact of these conditions (in both cases 4
responds) it can be assumed that they were taken into account in the deci-
sion-making process. The respondents’ answers to this question clearly
showed that the existence of local universities and colleges in the region
did not affect the choice of location for the Asian transnational corpora-
tions from the tested cluster.
In the second part of the study, during an IDI interview representatives
of non-dominant groups of companies were asked the question: Would
you choose the region as a location for your investment if the dominant
firms had not located previously in the region? Predominant group con-
sisted of negative responses, which reinforces the view presented earlier
that the functioning of the dominant companies in the region accounted
for an investment incentive for other companies of the cluster and raised
the region’s attractiveness in the eyes of other investors. Especially compa-
nies cooperating only with the dominant company did not see the possibil-
ity of investment in the region without the presence of the dominant firm.
Summing up the results of empirical research should be stated that in
the first part of the survey, all respondents agreed and pointed that the
existence of industrial cluster created by the dominant company was the
most important investment decision factor. All subjects gave answers indi-
cating that this was the main condition for making investments in the
region. On the basis of these responses it can be stated that the location of
the cluster is the dominant theme of internationalization for companies
participating in the survey. A secondary issue was location factors offered

The Attractiveness of Poland for Asian Foreign Direct Investments in the Context of Clusters Formation
114
by the region, such as geographic location, labor force, access to the Euro-
pean Union market and investment incentives offered by the special eco-
nomic zone. Thus, following the lead company on foreign markets can
also be a motive for internationalization, which creates a new transnational
corporations out of even small and medium-sized enterprises.
VI. CONCLUSIONS
Creating industrial clusters and wider business networks is becoming
more and more common in the global economy. Cooperation in a cluster
or network gives the company the chance to achieve a more spectacular
financial results, to reduce business risks and to gain new, previously inac-
cessible markets and customers. All these elements show that companies
under the decision process about internationalization are guided by the
presence of clusters or networks in a given market. The location of the
cluster is attractive both for companies that start cooperation with part-
ners from the cluster, and for those that move with the dominant com-
pany. Cluster not only increases the investment attractiveness of the loca-
tion, but can also reduce the risk of making foreign investments. Relation-
ships occurring in the cluster are formal, but more importantly, also in-
formal, hence greater attachment to the cluster’s company. The specific
relationship between enterprises, based on factors difficult to measure,
causes the successful cooperation between companies in one place raises
the desire to build a similar cluster in the new location5. In conclusion, the
following benefits for companies associated in clusters can be specified:
improvement of business efficiency through the availability of specialized
inputs, employees, and access to information; exchange of information
about market; measurable economic benefits; exchange of best practices;
stimulation of the entrepreneurial spirit; easy access to resources and infra-
structure; reduction of the time needed to enter the market.
Poland is a country with high investment attractiveness, in which in-
vests more and more foreign investors, including those from Asian coun-
tries. As it was shown in the paper, there are a lot of factors confirming
the Polish attractiveness. Beside the economic and geographical factors,
existing industrial clusters can be viewed as an attractive element of Polish
economy. There are new clusters every year, because of the advantages for
regions and companies as well. A strong clusters specialized in some sort
5 See more in A. H. Jankowiak, Lokalizacja w klastrze jako motyw internacjonalizacji prze-
dsiębiorstw (Location in the cluster as the motive of internationalization of enterprises),
Research Papers No. 369 of Wroclaw University of Economics, Wroclaw, 2014, pp.
263-271.

ANNA H. JANKOWIAK 115
of production (like automotive, IT or energetics) can attract new investors
from Asia.
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