No full-text available
To read the full-text of this research,
you can request a copy directly from the authors.
Nature and determinants of productivity growth of foreign subsidiaries in Central and East European countries
Abstract
The paper examines the determinants of productivity growth in foreign manufacturing subsidiaries in five Central and East European (CEE) countries by analysing patterns of control, nature of firms' capabilities and firms' market orientations. Building on the so-called 'subsidiary development' perspective, we show that productivity growth is determined jointly by corporate governance, production capability and market orientation variables. Within a dominantly production-oriented mandate, CEE subsidiaries have a relatively high level of autonomy in the control of their business functions. Majority foreign equity shareholding has a significant and positive impact on subsidiaries' productivity growth. Our results show strong regional characteristics.
... Multinational subsidiaries experience functional upgrading (downgrading) when their parents reallocate specialised business functions (or parts of it) between different subsidiaries or between headquarters and subsidiaries. So far only few studies (such as Ali-Yrkkö et al., 2011, Majcen et al., 2009, Sass and Szalavetz, 2013 provide insights to what extent functional upgrading (downgrading) alters multinational subsidiaries' value added. This is partly related to a lack of attention to the outcome of changes to subsidiaries' business functions as well as a lack of appropriate data. ...
... In terms of empirical evidence, Majcen et al. (2009) provides one of the first studies linking the portfolio of business functions to multinational subsidiaries' productivity. Their research is based in CEECs. ...
... The third reason could be limitations of research methods employed in prior research. For example, Majcen et al., 2009 do not track the changes in the portfolio of business functions over time and uses self-reported qualitative indicators from the same source to measure productivity. The case study evidence provided by Sass and Szalavetz (2013) does not allow for generalisation beyond the research specific context. ...
This paper investigates the relationship between the value capture of multinational subsidiaries and functional upgrading, which is defined as a diversification of employment from primary business functions to higher value adding activities such as ICT, R&D, marketing or logistics. By combining survey-based business function indicators with longitudinal accounting data for a representative sample of multinational subsidiaries located in six Central and Eastern European countries (CEECs), we assess the impact of functional upgrading on foreign subsidiaries' value capture. The results provide robust evidence that the breadth as well as the scope of functional upgrading induces an upward shift of subsidiaries' value added. The effect of functional upgrading is stronger in the earlier phases after entry of the foreign investor, while the long-term growth trend remains unaffected.
... The gap with European patenting is much smaller (11 per cent), but still substantial -and especially compared to the productivity gap. 4 This prompts questions about what it is that has promoted the rise in labour productivity if it is not world frontier technological innovation. In line with several other authors (see Kravtsova and Radosevic, 2009;Majcen et al., 2009), we argue here that CEE countries' growth is based on production capability (that is the capability to produce at world productivity levels in a given technology) rather than technology capability. ...
... By this we mean that they compete based on efficient use of standard technologies, that is, production capability and adoption of foreign technologies. Econometric research, based on the determinants of the productivity of FDI subsidiaries in 420 firms in 5 central European countries, shows that a significant portion of their productivity is explained by production capability (Majcen et al., 2009;Kravtsova and Radosevic, 2009). This is compatible with the results reported in Chapter 4 in this volume, which show that there is a weak link between labour productivity and product innovation in the NMS. ...
... Activities such as sales and marketing and natural resources extraction are usually located in countries in the early stages of transition (and farthest away from convergence with the EU norm), which have limited domestic sectors and poorly defined innovation systems. It is in the most advanced economies with good domestic technological capacity (core EU members) that the least truncated subsidiaries (which often include R&D departments) are located (see Majcen et al., 2009 for a more in-depth discussion). Few MNEs are continuing with the strategy of miniature replicas when engaging in greenfield investments. ...
This book uniquely applies the Schumpeterian innovation policy perspective to the countries of Central and Eastern Europe. A broadly defined framework of the science, technology, innovation and growth system underpins the empirical and conceptual analysis of the critical issues including demand, FDI, finance and education. © Slavo Radosevic and Anna Kaderabkova 2011. All rights reserved.
... However, their R&D expenditures are lower, as the firms in CEE countries generally focus on production capabilities (EBRD, 2014). Contextualizing the characteristics, economic growth in CEE countries is positively influenced by the presence of subsidiaries of foreign corporations and the FDI stock (Majcen et al. 2009). Hence, R&D expenditures in CEE countries are rather used for the acquisition of technology from abroad than the construction of innovation capabilities (Radošević, 2017). ...
... Thus, the positive impact of FDI inflows is outlined only for the case of those CEE countries, which are non-EU members. This may support the arguments of the dependence of these countries on foreign investments (Majcen et al. 2009) Systems of Innovation in Central and Eastern European countries: Path of Economic Transition and Differences in Institutions? Divergent results were also found for the effect of the intellectual property indicator on economic performance. ...
Against the background of the current political developments in Central and Eastern European (CEE) countries, like Ukraine, Poland, and Romania, the question arises what role the transformation of the economy and the resulting innovation linkages have played in these countries. This paper addresses this issue by exploring the impact of economic and institutional dimensions on the development of CEE countries, thereby explicitly distinguishing between European Union (EU) members and non-members. First of all, the performance development of the Gross Domestic Product (GDP) of the CEE countries and Western European countries is observed. In a further analysis step, the development of EU members is compared with that of CEE countries that are non-members of the EU. This paper estimates the impact of such factors as innovation, institutions, and political practices on the economic development of 37 European countries for the period from 2000 until 2020 by using a panel regression. The results of the analysis show that institutions matter, especially for non-EU-member CEE countries. Stable institutions-such as freedom of the press, freedom of expression, but also high levels of the Human Development Index-help countries to achieve a higher income development over time. The role of the innovative ability of countries is also decisive for a positive development.
... Enhanced technological complexity requires greater specialisation within the R&D function. This might open up strategic opportunities also for CEE subsidiaries characterised by a dominantly production-oriented mandate (Majcen et al. 2009). New tasks will be assigned to manufacturing subsidiary engineers and scientists in connection with addressing greening related challenges. ...
... Subsidiary upgrading is an evergreen issue of interest for international business research (classical references include Bartlett and Ghoshal 1989;Birkinshaw and Hood 1998;Jarillo and Martínez 1990). Co-evolving with their parent companies, subsidiaries absorb parent companies' transfers and accumulate specialised capabilities, which allows them to increase the range and the sophistication of their mandates and move towards higher-than-before value adding activities (see Majcen et al. 2009 for a discussion of subsidiary upgrading in a CEE perspective). ...
This paper investigates the relation between greening in global companies and the upgrading of manufacturing subsidiaries’ technological capabilities. Drawing on a proprietary database of secondary source information about greening-related product and process upgrading, research and technology development, and functional upgrading at 25 Hungarian manufacturing subsidiaries, we identify two greening related mechanisms that propel the upgrading of subsidiaries’ technological capabilities. First, greening enhances the organisational decomposition of innovation, which facilitates manufacturing subsidiary scientists’ and technicians’ participation in the global R&D team of their owners. Second, greening related changes in corporate routines prompt the delegation of new, sophisticated business functions and activities to subsidiaries. Some of the new tasks require subsidiaries’ indigenous technology efforts. © 2018, Nomos Verlagsgesellschaft mbH und Co. All rights reserved.
... As EU integration proceeds, MNCs are continuously restructuring their EU-wide supply chains to better rationalize their operations by responding to the heterogeneity of location-bound advantages across the different member states (Dimitropoulou et al. 2008, Dunning 2008, Hancké and Kurekova 2008, Majcen et al. 2009, Narula and Bellak 2009). According to Majcen et al. (2009), EU countries that are furthest away from convergence with the EU norm and with poorly defined innovation systems are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. ...
... As EU integration proceeds, MNCs are continuously restructuring their EU-wide supply chains to better rationalize their operations by responding to the heterogeneity of location-bound advantages across the different member states (Dimitropoulou et al. 2008, Dunning 2008, Hancké and Kurekova 2008, Majcen et al. 2009, Narula and Bellak 2009). According to Majcen et al. (2009), EU countries that are furthest away from convergence with the EU norm and with poorly defined innovation systems are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as the core EU countries, host the least truncated subsidiaries; often with R&D departments and (regional) headquarter functions. ...
... The most relevant implication of our findings is addressed to CEECs policy makers. As Majcen, Radosevic and Rojec (2009) pointed out, FDIs are an important vehicle for narrowing the productivity gap between CEECs and Western European countries. Our research shows that foreign subsidiaries localized in the former countries are the main profit generators and invest more in R&D than domestic firms (Meyer 1998;Holland et al. 2000;Hunya 2000;Resmini 2000;Rojec 2000;Konings 2001;Damijan et al. 2003;Majcen et al., 2009). ...
... As Majcen, Radosevic and Rojec (2009) pointed out, FDIs are an important vehicle for narrowing the productivity gap between CEECs and Western European countries. Our research shows that foreign subsidiaries localized in the former countries are the main profit generators and invest more in R&D than domestic firms (Meyer 1998;Holland et al. 2000;Hunya 2000;Resmini 2000;Rojec 2000;Konings 2001;Damijan et al. 2003;Majcen et al., 2009). However, as clearly synthesized by Holland et al., FDI inflows in CEECs improve "the overall growth potential of the recipient economies, but primarily through productivity improvements within the foreign affiliates themselves, rather than through increased capital investment, or technology spillovers to domestic firms" (2000: 169). ...
This paper aims at shedding new light on the variables that indicate the level of
autonomy of subsidiaries of internationalizing companies. Specifically, we
examine subsidiaries located in the transition economies of Central and Eastern
European Countries (CEECs). We identified a sample of 72 subsidiaries of
micro, small and medium-sized Italian companies, and we assessed the impact
of three variables on the subsidiary’s autonomy: the size; the strategic aim in
the local market (market seeking or cost reduction); and the degree of economic
development of the local country. Our results suggest that subsidiary's
autonomy reflects local country characteristics, but not the economic
development. Our findings also show that subsidiaries looking for penetrating
the local market are generally more autonomous than the ones pursuing costcutting
strategies.
... Though at the very beginning the strategic aim was exclusively cost reduction based, currrently-at least in the most developed of such countries (such as Poland)-the target seems to be more market enlargement based. Finally, it was recently demonstrated that the higher the foreign parent's overall control over business functions or, alternatively, the level of autonomy of subsidiaries in business functions, the higher is the productivity growth of the subsidiaries (Majcen, Radosevic, and Rojec 2009). ...
... The gap might be explained considering that Italian enterprises that invested in Romania were mainly attracted by cost savings opportunities, whereas those that set up subsidiaries in Poland were also driven by local market reasons. Such a result is consistent with recent findings according to which Slovenian (72.9% of sales to export) and Slovakian (59.8%) manufacturing subisidiaries are more export-oriented than Poland (32%) and Hungary (52.1%) ones (Majcen, Radosevic and Rojec 2009). On the contrary, Iammarino and Pitelis, analyzing a set of 85 subsidiaries of Greek firms operating in Romania and Bulgaria countries, found that ''market oriented FDI constitutes the bulk of foreign investments in CEECs, with factor costs playing a relatively small role' ' (2000, 161). ...
This article aims at providing further empirical evidence about the international activity of Italian small and medium enterprises (SMEs). In particular, the present contribution can be ascribable to the stream of research regarding the headquarters–subsidiary relationship. Focusing our attention on the subsidiary of Italian SMEs internationalized in Central and Eastern European countries (CEECs), we provide evidences about the main variables affecting their autonomy. Literature review provides us evidences of the fact that subsidiary autonomy is an extremely heterogeneous topic to investigate. Consequently, we decided to add to the quantitative analysis also a qualitative one. Through personal interviews with the Italian entrepreneurs and the managers of the local subsidiaries, we got a better and deeper insight into the evidences coming from the quantitative data.
... In the absence of large markets or sufficiently well-developed innovation systems and industrial clusters, many MNEs preferred to seek economies of scale and scope in their existing activities within the core EU countries despite the low cost advantages the NMS offered. Majcen et al. (2009) note how EU countries that are furthest away from convergence with the EU norm are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as the core EU countries, host the least truncated subsidiaries, often with R&D departments and headquarter functions. ...
... tion, many MNEs relocated activities (Chobanova, 2009; Meyer and Jensen, 2003). In the absence of large markets or sufficiently well-developed innovation systems and industrial clusters, many MNEs preferred to seek economies of scale and scope in their existing activities within the core EU countries despite the low cost advantages the NMS offered. Majcen et al. (2009) note how EU countries that are furthest away from convergence with the EU norm are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as ...
This article summarises recent revisions to the investment development path(IDP) as postulated by Narula and Dunning (2010). The IDP provides a framework to understand the dynamic interaction between foreign direct investment (FDI) and economic development. The revisions take into account some recent changes in the global economic environment. This paper argues that studies based on the IDP should adopt a broader perspective, encompassing the idiosyncratic economic structure of countries as well as the heterogeneous nature of FDI. It is critical to understand the complex forces and interactions that determine the turning points in a country’s IDP, and to more explicitly acknowledge the role of historical, social and political circumstances in hindering or promoting FDI. We discuss some of the implications for EasternEuropean countries and provide some guidelines for future research.
... ot developed their science and technology infrastructure to the level that they possess an absolute advantage in basic research for which MNEs seek to locate a stand‐alone, specialised R&D facility. As EU integration has proceeded, MNEs have continuously restructured their EU‐wide supply chains to better rationalize their operations (Dunning 2008). Majcen et al. (2009) notes how EU countries that are furthest away from convergence with the EU norm are often host to single‐activity subsidiaries, primarily in sales and marketing or labour‐intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as ...
... The share of investment in headquarters functions is also lower in the NMS, while the share of manufacturing projects is much higher. These results provide additional empirical support to the research of other scholars (Chobanova 2009; Hancké and Kurekova 2008; Majcen et al. 2009), that on the functional 5 The database includes investments made by European and non-European firms in all the EU member states. It includes greenfield investments and expansions of existing subsidiaries but excludes M&As. ...
This paper explores the impact of MNEs on innovation systems and the policy options available for peripheral economies to attract and embed the R&D activities of MNEs. After developing the conceptual and policy framework, we discuss the case of the new member states from Central and Eastern Europe that joined the EU between 2004 and 2007. We analyse the evolution of the R&D activity of MNE subsidiaries since the 1980s, contrasting the new member states with the core and Mediterranean countries of the EU. This analysis is useful to illustrate some common challenges for peripheral economies, including the difficulty of building linkages with MNEs in high value adding activities; the risk of crowding-out of domestic R&D following cross-border acquisitions; the risk of external dependency; and the limitations of protectionist policies. We recommend that governments of peripheral economies focus their efforts on fostering a demand-oriented upgrading of technological capabilities and on stimulating domestic linkages and clusters around MNEs, rather than seeking to attract supply-driven R&D.
... The post-Soviet states, however, are isolated from international industrial networks or are integrated with a few natural-resource-based industries. Evidence at the micro level suggests that foreign investors prefer localproduction-oriented subsidiaries with little strategic autonomy (Majcen, Radosevic, and Rojec 2009). ...
This handbook is currently in development, with individual articles publishing online in advance of print publication. At this time, we cannot add information about unpublished articles in this handbook; however, the table of contents will continue to grow as additional articles pass through the review process and are added to the site. Please note that the online publication date for this handbook is the date that the first article in the title was published online. For more information, please read the site FAQs.
... Foreign investors have a modern management perspective; they understand how to create opportunities for managers to promote their ability to run businesses and will exploit risky markets in search of profits. At the same time, they build effective control over corporate governance to ensure those risky activities are profitable (Majcen et al., 2009). ...
The study investigates the correlation between foreign ownership and corporate risk at 147 listed firms in Vietnam from 2015 to 2019. Quantile regression and fuzzy-set Qualitative Comparative Analysis (fsQCA) technique method are applied to examine this relationship. Although the findings reveal that foreign ownership has an impact on corporate risk, the direction of this impact varies depending on the specific conditions. These empirical results have significant implications for firms in managing risks through effective policies related to foreign ownership. The findings will also enable foreign investors to assess the risk level of their investments when analyzing the current situation of a given firm, thereby adjusting their investment capital appropriately.
... Activities such as sales and marketing and natural resources extraction are usually located in countries in the early stages of transition (and farthest away from convergence with the EU norm), which have limited domestic sectors and poorly defined innovation systems. It is in the most advanced economies with good domestic technological capacity (core EU members) that the least truncated subsidiaries (which often include R&D departments) are located (see Majcen et al., 2009 for a more in-depth discussion). Few MNEs are continuing with the strategy of miniature replicas when engaging in greenfield investments. ...
... Empirical results point to diverse results concerning the upgrading in CEE subsidiaries. Majcen, Radosevic, and Rojec (2009) analyzed first empirically in CEE the relationship between the portfolio of business functions to multinational subsidiaries' productivity. Their results point to a link between specialization into a narrowly defined production-oriented mandate and higher productivity levels of subsidiaries operating in CEE. ...
This chapter examines how multinational enterprises (MNEs) headquartered in the region or investing from outside manage their production capacities in Central and Eastern Europe (CEE) through inward and outward foreign direct investment (FDI), or other forms of engagement of those firms in host countries. It shows that Western and intra-regional MNEs adjust their strategies to local conditions dictated by the regulatory framework of individual host countries, the availability and quality of local business partners, and the quality of available skills and infrastructure. It points at different ways through which local and international MNEs adapt their production plans to a context that in the bulk of the region can be called “post-transition.” These choices in turn affect the decisions that different types of MNEs take in locating various parts of their value chains in the region, and their strategies vis-à-vis the upgrading or relocation of existing capacities.
... The new status implies changes both in the subsidiary's autonomy and in parent companies' control and coordination methods, or at least it motivates the parent company to adopt a less authoritarian and less formalistic coordination style (Dörrenbächer and Gammelgaard, 2006;Ambos et al., 2011). Since upgrading is based on demonstrated subsidiary capabilities, it will allow more autonomy for some of the functional officers of the subsidiary, at least with respect to selected local issues (Martinez and Jarillo, 1989;Cantwell and Mudambi, 2005;Bouquet and Birkinshaw, 2008; and in a CEE context: Jindra et al., 2009;Majcen et al., 2009). ...
This paper examines the patterns of subsidiary autonomy at the organizational periphery: at
multinational companies’ (MNCs) manufacturing subsidiaries in Hungary. It investigates the impact of upgrading
on subsidiary autonomy.
Our case study-based investigation (27 in-depth interviews at 14 manufacturing subsidiaries) integrates three
previously isolated lines of research: 1) subsidiary upgrading, 2) subsidiary autonomy and 3) headquarters’ role in
MNCs.
We find no direct relation between upgrading and subsidiary autonomy, since external factors such as changes
in the business environment and/or in parent companies’ strategic decisions often counteract upgrading-induced
effects.
It is shown that the subsidiaries’ moving up the value chain is paralleled by similar upward shifts in parent
companies’ activity specialization. The reconfiguration of parent companies’ activities, together with the
expansion of the size and scope of the multinational company will necessarily have an impact on the
headquarters’ coordination and governance practices: over time they tend to become more formal.
... Their importance as drivers of growth vary according to their dependence on achieved income and their technology levels and the structural features of their economies. Majcen, Radosevic, and Rojec (2009) and Kravtsova and Radosevic (2011) show that, in Eastern Europe, production capability was a significant determinant of productivity growth at both the micro and macro levels. This is not unique to this region, but is a general feature of middle-income economies more generally, as highlighted in Figure 4 and in the literature on technological capabilities cited earlier. ...
This paper discusses why we need a theory and metrics of technology upgrading. It critically reviews existing approaches to technology upgrading, and proposes a theoretically relevant and empirically grounded intermediate conceptual and statistical framework to illustrate the types of challenges facing economies with different levels of income. It conceptualises technology upgrading as a three-dimensional process that considers the intensity and type of technology upgrading based on different types of innovation and technology activities; the broadening of technology upgrading through exploitation of technology and knowledge diversification; and interaction with the global economy via the import, adoption, and exchange of knowledge. We consider these to be necessary first steps towards a theory and metrics of technology upgrading and the generation of more relevant composite indicator of technology upgrading. © 2016 The Author(s). Published by Informa UK Limited, trading as Taylor & Francis Group
... They showed that despite some differences in the estimated parameters between the Baltic states and the Central European countries, the formal tests indicated that the results obtained for these two groups of countries were not statistically different. Majcen et al. (2009) used survey data in considering the factors that induce productivity changes in foreign subsidiaries in the manufacturing sectors of five CEE economies (Estonia, Hungary, Poland, Slovakia and Slovenia). According to the ordered probit model results, corporate governance, production capability and market orientation were significant variables for productivity. ...
This survey focuses broadly on real and financial sector studies in former transition economies of Central and Eastern Europe. The survey shows that in the real sector there has been considerable trade and global integration in the post-transition period. More- over, there is no uniform evidence regarding convergence or divergence from the sur- veyed empirical studies regarding business cycles in Central and Eastern Europe. Financial sector studies show that foreign bank ownership is associated with higher banking efficiency than in the case of domestic bank ownership and significant return and volatility transmission also from core European financial markets. However, the recent global financial crisis significantly affected these patterns. Finally, central bank communication seems to have significant wealth effects in financial markets and tends to reduce financial market uncertainty.
... duálne ekonomiky (Zajac a Baláž, 2007), v ktorých koexistujú dva sektory. Jeden sektor tvoria pobočky mnohonárodných spoločností (MNS), ktorých produkcia je založená na špičkových technológiách (Majcen, Radoševič a Rojec, 2009), no výskum a vývoj týchto technológií sa robí v materských krajinách MNS. Druhý sektor tvoria domáce malé a stredné podniky, ktoré konkurujú nízkymi cenami produkčných vstupov, najmä práce. ...
This paper examines goals, themes, instruments and outcomes of research and development policies in ten new Member Countries of the EU. Intensity of the public and business R&D expenditure approaches the EU averages in the Czech Republic, Slovenia, Hungary and Estonia. These countries may consider shifts in their R&D policies and increase importance of indirect forms of support (tax allowances, financial engineering tools), and also cluster policies and networking initiatives. Slovakia, Poland, Latvia, Lithuania, Bulgaria, Romania and Latvia, on the other hand, should primarily invest in improvements in the R&D infrastructure and increasing stocks and quality of researchers in public and private sectors.
... Similarly, Majcen et al. (2009) discuss how EU countries that are at an early stage of transition, furthest away from convergence with the EU norm and with poorly defined innovation systems are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as the core EU countries, have hosted the least truncated subsidiaries, often with R&D departments and (regional) headquarter functions. ...
This paper addresses the role of multinational enterprises (MNE) in the upgrading of national innovation systems and the policies that the new member states (NMS) of the European Union (EU) can put in place to enhance it. We use the innovation systems approach as a basis for analyzing policy options and focus on the MNE and the potential for linkages, rather than limiting our analysis to foreign direct investment (FDI) and spillovers. We also deliberately consider the scope and competence at the MNE subsidiary level. These two perspectives are useful in helping highlight the point that the tendency to focus on FDI inflows is flawed, since knowledge exchanges and innovation are establishment level phenomena. Instead, policies should focus on the embedding and upgrading of MNE subsidiaries already present in the country, with the aim of facilitating their evolution towards higher value adding activities and their tendency to engage in R&D. We argue that this approach requires a closer interplay between FDI, innovation and industrial policies. We also sustain that it is more practical for new member states to concentrate on attracting „demand-driven‟ rather than „supply-driven‟ R&D, and thus recommend governments to set up programmes that foster demand-oriented upgrading of human capital and public R&D.
... duálne ekonomiky (Zajac a Baláž, 2007), v ktorých koexistujú dva sektory. Jeden sektor tvoria pobočky mnohonárodných spoločností (MNS), ktorých produkcia je založená na špičkových technológiách (Majcen, Radoševič a Rojec, 2009), no výskum a vývoj týchto technológií sa robí v materských krajinách MNS. Druhý sektor tvoria domáce malé a stredné podniky, ktoré konkurujú nízkymi cenami produkčných vstupov, najmä práce. ...
Abstract
This paper examines goals, themes, instruments and outcomes of research and development policies in ten new Member Countries of the EU. Inten-sity of the public and business R&D expenditure approaches the EU av-erages in the Czech Republic, Slovenia, Hungary and Estonia. These countries may consider shifts in their R&D policies and increase im-portance of indirect forms of support (tax allowances, financial engineering tools), and also cluster policies and networking initiatives. Slovakia, Pol-and, Latvia, Lithuania, Bulgaria, Romania and Latvia, on the other hand, should primarily invest in improvements in the R&D infrastructure and increasing stocks and quality of researchers in public and private sectors.
Článok analyzuje ciele, nástroje, témy a výsledky politík výskumu a vývoja (VaV) v 10 nových členských štátoch EÚ. Intenzita verejných a súkromných výdavkov na VaV sa približuje priemeru EÚ v Česku, Slovinsku, Maďarsku a Estónsku. Tieto krajiny môžu uvažovať so zmenou mixu politík VaV smerom k nepriamym nástrojom podpory (daňové úľavy a nástroje finančného inžinierstva) a tiež ku klastrovým politikám a podpore budovanie sietí medzi VaV a priemyslom. Slovensko, Poľsko, Litva, Lotyšsko, Bulharsko a Rumunsko by mali primárne investovať do skvalitnenia infraštruktúry a zvýšenia počtov a kvality ľudských zdrojov vo verejnom a súkromnom sektore VaV.
... As Majcen, Radosevic and Rojec (2009) pointed out, FDIs are an important vehicle for narrowing the productivity gap between CEECs and Western European countries. Our research shows that foreign subsidiaries localized in the former countries are the main profit generators and invest more in R&D than domestic firms (Meyer 1998;Holland et al. 2000;Hunya 2000;Resmini 2000;Rojec 2000;Konings 2001;Damijan et al. 2003;Majcen et al., 2009). However, as clearly synthesized by Holland et al., FDI inflows in CEECs improve "the overall growth potential of the recipient economies, but primarily through productivity improvements within the foreign affiliates themselves, rather than through increased capital investment, or technology spillovers to domestic firms" (2000: 169). ...
... The growth of local subsidiaries measured primarily by increase of employees/or total revenues (McMahon, 2001;McMahon, Holmes, Hutchinson, & Forsaith, 1993;Račić, Aralica, & Redžepagić, 2008) needs to be primarily observed as a result of FDI (Foreign Direct Investment) influence on productivity growth in Central and Eastern European Countries. Dabic and Bach (2008) and Majcen, Rojec, and Radosevic (2006) argue that industrial integration via FDI led to considerable increase in productivity, technology and quality in the Central Eastern European Countries. In these countries the local subsidiaries are responsible primarily for production whereas other functions, i.e. knowledge related businesses, are under control of foreign investment enterprises. ...
... Similarly, Majcen et al. (2009) discuss how EU countries that are at an early stage of transition, furthest away from convergence with the EU norm and with poorly defined innovation systems are often host to single-activity subsidiaries, primarily in sales and marketing or labour-intensive manufacturing and assembly, as well as in natural resource extraction. In contrast, the most advanced economies with domestic technological capacity, such as the core EU countries, have hosted the least truncated subsidiaries, often with R&D departments and (regional) headquarter functions. ...
This paper addresses the role of multinational enterprises (MNE) in the upgrading of national innovation systems and the policies that the new member states (NMS) of the European Union (EU) can put in place to enhance it. We use the innovation systems approach as a basis for analyzing policy options and focus on the MNE and the potential for linkages, rather than limiting our analysis to foreign direct investment (FDI) and spillovers. We also deliberately consider the scope and competence at the MNE subsidiary level. These two perspectives are useful in helping highlight the point that the tendency to focus on FDI inflows is flawed, since knowledge exchanges and innovation are establishment level phenomena. Instead, policies should focus on the embedding and upgrading of MNE subsidiaries already present in the country, with the aim of facilitating their evolution towards higher value adding activities and their tendency to engage in R&D. We argue that this approach requires a closer interplay between FDI, innovation and industrial policies. We also sustain that it is more practical for new member states to concentrate on attracting "demand-driven" rather than "supply-driven" R&D, and thus recommend governments to set up programmes that foster demand-oriented upgrading of human capital and public R&D.
... e of FIEs in equity, value added, number of employees, sales had been reached by Hungary in the mid nineties, but was increasing in other countries as well. Labour productivity of FIEs was higher and export activity more intensive than in the case of domestic companies. FDI can have a positive impact on productivity in the less developed economies. Majcen et al. (2009) analyse productivity changes in five CEE economies (Estonia, Poland Hungary, Slovakia, Slovenia) based on a questionnaire survey among 433 foreign subsidiary companies in 2002. They found that the higher the level of control of the foreign parent company, the higher is the subsidiary's productivity growth. Apart from that, subsidiaries ...
Foreign direct investment played a vital role in the economic transformation of the Central and Eastern European countries. It was also a crucial factor in the modernisation of Spain after its accession to the EU. This paper gives an overview on the development of foreign direct investment in the Central and Eastern European countries (Poland, Czech Republic, Slovakia, Hungary, Slovenia, Bulgaria and Romania) compared to Spain. The characteris-tics of FDI inflow and outflow are shown separating three periods since 1995. Afterwards certain main effects of FDI on the host economies are briefly mentioned. RESUMEN:La inversión extranjera directa juega un papel vital en la transformación económica de los países de Centro y Este de Europa. Fue también un factor crucial en la modernización de España después de su adhesión a la UE. Este documento ofrece una visión general sobre el desarrollo de la inversión extranjera directa en los países de Europa Central y del Este (Polonia, República Checa, Eslovaquia, Hungría, Eslovenia, Bulgaria y Rumania) en comparación con España. La carac-terísticas de las entradas y salidas de IED se muestran en tres periodos distintos desde 1995, mencionándose después algunos efectos principales de la IED en las economías receptoras.
... However, evidence presented in Radosevic et al (2010) strongly suggest that the balance between exploration and exploitation type of knowledge activities strongly differs across three types of firms. In addition, the econometric evidence on dependence of the CEE firms on value chain partners is quite strong in the case of local FDI subsidiaries which represent the most productive segment of enterprises in these economies (see Majcen et al. 2009). Value chain dependent firms could produce less R&D and intellectual property of their own, which might imply a non-positive relationship between this knowledge source type and EO dimensions. ...
In the knowledge intensive context, firms’ capacity to integrate external and internal
sources of knowledge becomes an important competitive advantage and may
distinguish entrepreneurial from conservative firms. This paper explores the
proposition that differences in strategic entrepreneurial orientation (EO) across firms
may be significantly determined by differences in firms’ preferences regarding
knowledge sources. Our research is based on 208 firms operating in knowledge
intensive industries in six Central and East European countries (CEEC). We
identified three types of firms in terms of patterns of sources of knowledge: external
R&D knowledge based firms, in-house knowledge based firms and value chain
dependent firms. By using different proxies or different dimensions of EO, we have
found that the EO is strongest in firms based on external knowledge. Firms with inhouse
based knowledge have an intermediate strength of the EO, and firms dependent
on value chains are the least entrepreneurially oriented. We have also found moderate
support for grouping different proxies of EO into three dimensions identified in
literature – innovativeness, pro-activeness and risk-taking. Value chain firms are not
pro-active, have the lowest innovativeness, and are the most risk averse. External
knowledge based firms are the most active in all three dimensions of EO, while inhouse
knowledge based firms are in an intermediate position. Our results point to
strong systemic features of entrepreneurial activities; i.e., EO is inherently different in
different sub-populations of firms depending on their patterns of sources of
knowledge. It seems that these patterns operate as a moderating factor between
performance and the EO, which explains mixed results from the literature.
It is known that the productive nature-labour-capital triad gains connotation and meaning depending on the historical, territorial, and political context in which it occurs. When Ricardo told us that people ”rise” towards machinery and that fear of unemployment is irrational, he sent his thoughts to wander within the boundaries of a microenvironment and things seemed clear to him. They are no longer that simple when people from the East ”rise” towards the machinery of the West, in cadences and occupational structures shaped by factors difficult to be integrated in certain equations. This chapter tries to highlight in which manner, and with what consequences for the sustainable development of the East, does the human capital from the East ”rises” towards the machinery of the West or the movement of capital from the West towards the human resources of the East. We are also interested in the way in which regions with unused natural resources and insufficiently accumulated capital, such as those specific to Eastern Europe, are subjected to a confrontation of weak, direct substitution, Eastern nature—Western capital, often losing, with consequences on the production structures and healthy development in the East.
From a Schumpeterian perspective, national economic growth depends on firms with growth capacity, while firms with growth capacity are defined as business entities capable of combining business skills and generating goods with added value. The identification of the capabilities that lead to business growth continues to be a major research topic with several studies highlighting various internal capabilities that enable and/or constrain firm growth. Nevertheless, our understanding of the firm capabilities that lead to firm growth is scant (Sutton & Trefler, 2016). Also, most empirical work examines developed economies. Several studies use an adapted Schumpeterian approach to study the process of building technological capabilities in developed economies (Lall, 1992; Bell & Pavitt, 1993; Kim, 1997; Kumar et al., 1999; Dutrenit, 2000; Lee et al., 2021, etc.). The absence of research on developing economies is particularly evident in the area of technological capabilities.
Against the backdrop of the current political developments in Central and Eastern European (CEE) countries, such as Ukraine, Poland, and Romania, the question arises as to the role played by economic transformation and the resulting innovation linkages in these countries over the last 20 years. The main purpose of this paper is to explore the impact of economic and institutional dimensions on the development of CEE countries, explicitly distinguishing between European Union (EU) members and non‐members, and thus reflecting the differences in institutions and path dependency. Furthermore, the paper contrasts the performance of CEE countries with that of Western European countries. To achieve these objectives, the impact of factors such as innovation, institutions, and political practices on the economic development of 37 European countries from 2000 until 2020 is followed using fixed effects regression and Ordinary least squares (OLS) regression. The results of the analysis show the importance of institutional factors such as low levels of corruption, political freedoms, and intellectual property. The effect of institutional variables was particularly pronounced in the case of non‐EU countries, which indicates the particular importance of the development of stable institutions for achieving higher levels of economic development for this category of countries.
Earlier research proved the existence of multilayer dualities within the Hungarian Economy. Based on these findings, this paper examines the driving forces of productivity differences comparing two groups in Hungarian manufacturing sector: locally owned and foreign-owned companies. The cluster analysis and the panel regression based on financial data of 1725 firms for the period 2014 to 2017 revealed that, while crucial driving forces may match, their direction and importance differ considerably. While foreign companies have an apparent advantage in productivity, their increase in export ratio correlates with lower efficiency; in contrast, export intensity boosts the efficiency of the locally owned companies. While the proportion of highly trained workforce correlates with productivity, this effect appears to be weaker in foreign-owned companies, which signals inefficient use of intellectual resources. These results raise questions regarding the efficacy of the current Hungarian economic policy of promoting foreign investments (FDIs).
https://napvilagkiado.eu/product/globalis-erteklancok-szakosodas-es-feljebblepes/
In this professorial lecture I develop systems of innovation perspective on post-socialist transformation process in countries of Central and Eastern Europe
This paper examines goals, themes, instruments and outcomes of research and development policies in ten new Member Countries of the EU. Intensity of the public and business R&D expenditure approaches the EU averages in the Czech Republic, Slovenia, Hungary and Estonia. These countries may consider shifts in their R&D policies and increase importance of indirect forms of support (tax allowances, financial engineering tools), and also cluster policies and networking initiatives. Slovakia, Poland, Latvia, Lithuania, Bulgaria, Romania and Latvia, on the other hand, should primarily invest in improvements in the R&D infrastructure and increasing stocks and quality of researchers in public and private sectors.
The dynamics of the global economy and international trade are increasingly characterised by global value chains (GVCs), within which intermediate goods and services are traded in fragmented and internationally dispersed production processes. Successful integration of firms and countries in GVCs is increasingly important for their development and integration in the international economy. Based on an analysis of conceptual, empirical an policy-related literature on (i) GVCs in development economics and international trade models, (ii) factors behind the proliferation of GVCs, (iii) development effects, benefits and risks of integrating into GVCs, (iv) importance of GVCs for international trade, (v) theoretical considerations and empirical evidence on firms' (MNEs') decision-making related to the establishing and modality of GVCs, (vi) GVC governance and upgrading a firm's position within a GVC, and (vii) GVC-related changes to economic policy, we identify the priority topics for future GVCs research that are the most important for the economies of catching-up countries ('factory economies') and their firms.
Smart specialisation is currently probably the largest innovation policy experiment in the world. Its aim is to move the EU less developed countries and regions on path of R&D-based growth. This transformation requires not only endogenous knowledge and technology accumulation building but also coupling with international knowledge and production networks. Yet, internationalisation does not seem to be a crucial component in the design and development of Research and Innovation Strategies for Smart Specialisation (RIS3), which are at odds with the strong dependence of the EU New Member States (EU-13) on FDI and global value chains. Our analysis is grounded in the key ‘stylised facts’ related to EU-13 R&D&I activities, and the complex link between innovation and internationalisation. Innovation systems in the EU-13 are fragmented and based on largely public R&D systems and on predominantly production-oriented foreign direct investment (FDI). This structural weakness calls for stronger support for innovation-oriented activities and for the integration of global value chains (GVCs) and FDI into local innovation systems. We explore the main obstacles to the internationalisation of smart specialisation and discuss ways to overcome them. We highlight the policy action areas related to providing support for technology upgrading in relation to the internationalisation of smart specialisation.
We explore the issues of measurement of technology upgrading of the economies moving from middle to high income status. In particular, our focus is on the central and eastern European economies (CEE) within the context of sample of 42 economies ranging from lower middle income to upper high income level economies
At the end of the economic transition and in the context of catching up within the European Union, this thesis studies the technology transfer associated with foreign direct investment (FDI) in Central and Eastern Europe. Technological externalities are considered the main contribution of FDI to the economic development of host countries. The first part of this work analyzes the microeconomic mechanism of technology transfer. After having evaluated the potential for spillovers through the productivity gap and the intensity of intersectoral linkages, we identify the impact of technological spillovers on the productivity of domestic firms. We construct several measures of horizontal and vertical externalities, while giving particular attention to local firm’s status throughout the supply chain. Finally, we tested the role of local absorptive capacity and technological gap in the capture of spillovers. In the second part we conduct a macroeconomic analysis oriented on two directions: the relationship between FDI and local investment and the aggregate impact of FDI on growth. We start from the assumption of destructive creation between FDI and local investment and analyze this issue from the perspective of different types of FDI. We also separate the interaction mechanism between the affiliates and the domestic firms according to the real market and the financial market. We then evaluate the contribution of aggregate externalities to technical progress, which allows us to illustrate the overall impact of FDI on economic growth. Finally, we consider the FDI-growth relationship from a double perspective, in order to show the existence of a virtuous circle
This article summarises recent revisions to the investment development path (IDP) as postulated by Narula and Dunning (2010). The IDP provides a framework to understand the dynamic interaction between foreign direct investment (FDI) and economic development. The revisions take into account some recent changes in the global economic environment. This paper argues that studies based on the IDP should adopt a broader perspective, encompassing the idiosyncratic economic structure of countries as well as the heterogeneous nature of FDI. It is critical to understand the complex forces and interactions that determine the turning points in a country's IDP, and to more explicitly acknowledge the role of historical, social and political circumstances in hindering or promoting FDI. We discuss some of the implications for Eastern European countries and provide some guidelines for future research.
With the fragmentation and the geographical dispersal of production, not goods but activities are the basic units of international trade analyses. Therefore, data about local subsidiaries' business functions (BFs) produce a more reliable picture on local subsidiaries' upgrading patterns than trade statistics with a 'product approach'. This paper presents the first results of a Hungarian research project on local subsidiaries' functional upgrading. Our results call for the refinement of the analytical framework and of data gathering methods. Three kinds of challenge have to be resolved: 1) BFs are decomposable, consisting of dozens of sub-functions, which results in sizeable inter-subsidiary differences in the contribution of 'identical' functions to MNC-level value added; 2) the impact of functional upgrading on subsidiaries' performance indicators is ambiguous; 3) BF decomposability impacts subsidiary classifications. Subsidiaries can be classified innovative contributors in specific sub-functions, while at the same time they are implementers with basic capabilities in other sub-functions of the same BF.
This paper explores the determinants of productivity in the countries of Eastern Europe (EE) through the perspective of ‘narrow’ and ‘broad’ national systems of innovation (NSI). Based on panel econometrics, it examines the extent to which systems in EE could be considered ‘(in)efficient.’ Our results suggest that the EE countries have lower levels of productivity than might be expected given their research and development (R&D), innovation and production capabilities. The inefficiencies of ‘broad’ NSI are compounded by the inefficiencies of ‘narrow’ NSI in terms of generating numbers of science and technology publications and resident patents relative to R&D employment compared to the rest of the world. Our results point to an important distinction between technology and production capability as the drivers of productivity improvements and provide some policy implications.
This paper aims at shedding new light on the variables that indicate the level of autonomy of subsidiaries of internationalizing companies. Specifically, we examine subsidiaries located in the transition economies of Central and Eastern European Countries (CEECs). We identified a sample of 72 subsidiaries of micro, small and medium-sized Italian companies, and we assessed the impact of three variables on the subsidiary's autonomy: The size; the strategic aim in the local market (market seeking or cost reduction); and the degree of economic development of the local country. Our results suggest that subsidiary's autonomy reflects local country characteristics, but not the economic development. Our findings also show that subsidiaries looking for penetrating the local market are generally more autonomous than the ones pursuing costcutting strategies.
This paper examines whether foreign investors in Korea affect incentives for firms to take risks in corporate investment. The short-term focus of foreign investors encourages managers to engage in conservative investment behavior. On the other hand, foreign investors encourage managers to focus on long-term value rather than short-term returns as active participants in corporate governance. These competing views are examined by testing for the association between foreign ownership and variations in corporate cash flow, a proxy for the risk of chosen investments. Furthermore, we examine whether risk taking is positively associated with firm growth, which is a primary concern in debates regarding the myopic behaviors of foreign investors. The results show that firms with high foreign ownership are less likely to avoid risk takingâand that risk taking is, in turn, positively associated with firm growth, implying that foreign investors perform a monitoring function in encouraging value-enhancing risk taking.
This paper asks: what can governments of new member states do to encourage MNEs to invest in R&D? There are two types of MNE R&D. Innovation can be undertaken in order to adapt its existing products and services to local stimuli. This is 'demand-driven R&D'. Innovation can also be in stand-alone R&D facilities which are considerably more knowledgeintensive, and imply a considerably greater dependence on domestic knowledge sources and infrastructure. This is 'supply-side R&D'. These two types of R&D require somewhat different approaches, and necessarily imply different policy options. In this paper, furthermore, we focus on the MNE and the potential for linkages, and do not limit ourselves to FDI and spillovers. MNEs engage in a variety of other informal and non-equity agreements to engage in knowledge exchange. We also deliberately consider the scope and competence at the MNE subsidiary level. These two novelties are useful in helping highlight the point that the tendency to focus on FDI flows is flawed, since knowledge exchanges and innovation are establishment level phenomena. An MNE policy is required which must link FDI policy and industrial policy in tandem. This paper argues that it is most practical to recommend that new member states focus on attracting and fostering demand-driven R&D activities by MNEs. Furthermore, we recommend that governments reduce the emphasis on costs while increasing the emphasis on specialised locationbound knowledge assets, and setting up programmes that foster demand-oriented upgrading of public R&D and human capital.
In this paper, we measure the indirect impact of FDI on the total factor productivity of domestic plants in a number of UK manufacturing industries, 1974-95, using a standard production-function-based approach. We use data from the UK ARD and information derived from UK input-output tables. Our results indicate that the competition and ‘absorption capacity’ effect at times outweighs potential benefits, leading to negative spillovers. We also find that inter-industry spillovers are generally more prevalent than intra-industry spillovers. We conclude that the nature of spillovers is such that measurement techniques traditionally adopted fail to explain adequately their complex and diverse nature.
This report gives an overview of patterns of structural change in Central and Eastern European economies over the decade 1989-1999. The analysis in this paper is restricted to a sub-sample of transition economies, namely the countries of Central and Eastern Europe (CEECs) - with the exception of the Baltic countries - which are currently also candidate countries for EU accession. While it would be interesting to extend the analysis to a wider range of transition economies, we were restricted by the use of a disaggregated database which allows reliable cross-country comparative analysis of patterns of structural change.* Furthermore, we only deal with a subset of issues which come under the heading of 'structural change' the focus of the analysis is on changes in the structures of production, employment and in the positions of CEECs in the European division of labour, i.e. on the CEECs' international specialization.The structure of the paper is as follows section 1 presents the broad patterns of sectoral change, i.e. the processes of deagrarization, deindustrialization and tertiarization which have taken place since the beginning of transition. Section 2 reviews some of the evidence on industrial restructuring and shows some interesting inter-country and inter-industry differences in this respect. Section 3 refers to the role which FDI plays in industrial restructuring and in the processes of industrial specialization of CEE economies. Section 4 reviews the developments of inter-industry and intra-industry specialization of CEECs in international trade with the EU. Section 5 refers to the evolving position of different CEECs in the European-wide division of labour and whether we can detect patterns of convergence in structure with different groups of EU economies. Section 6 reports the results of an econometric analysis of patterns of industry-level catching-up; the first part (6a) of this section deals with catching-up in productivity levels and wage rates, the second part (6b) with catching-up in product quality (measured by export unit values at a very detailed product level). Section 7 concludes with some remarks on the impact that EU accession might have on patterns of structural transformation and further East-West European integration.
This paper considers the evidence that has been collected on the determinants and effects of FDI in Central and Eastern Europe, with a strong focus on Hungary, Poland and the Czech Republic. There are two main sources from which we draw information: survey studies and econometric studies. We consider how each of these can contribute to the field of research, whether they give us complementary or contradictory information, and how this information can best be exploited. We conclude that the findings of econometric studies tend to support survey results. This suggests that market seeking has been the primary motive of investors, and that the presence of foreign firms has increased productivity levels in Central Europe, but only to a limited degree. An earlier version of this paper was presented at a workshop at WIFO, Vienna. We are grateful to Ray Barrell, Nigel Pain, Michael Pfaffermayr, Jan Stankovsky and other workshop participants for helpful comments and suggestions. We would also like to thank Andrea Elteto and Tamas Szemler for their contributions to the study of Hungary; Jan Visek for contributing to the study of the Czech Republic; Ray Barrell and Nigel Pain for important contributions to and extensive comments on earlier drafts of the paper; and Florence Hubert for helpful advice regarding the theoretical foundations of FDI. This work was supported by an ACE grant from the European Commission (project number P96-6086-R).
This article begins with a summary of the foundations of four streams of multinational management literature pertaining to the subsidiary. The most recent of these streams, namely Subsidiary Development, receives special attention. We look at the way in which the literature on subsidiary-management has evolved, and investigate how the streams have built upon each other. Autonomy is investigated as a growing theme in the literature and report word counts to validate our literature-based propositions. We also examine the literature in the light of national cultural differences, revealing considerable country bias. Finally, we look into the potential future directions of the field.
Many countries strive to attract foreign direct investment (FDI) hoping that knowledge brought by multinationals will spill over to domestic industries and increase their productivity. In contrast with earlier literature that failed to find positive intraindustry spillovers from FDI, this study focuses on effects operating across industries. The analysis, based on firm-level data from Lithuania, produces evidence consistent with positive productivity spillovers from FDI taking place through contacts between foreign affiliates and their local suppliers in upstream sectors. The data indicate that spillovers are associated with projects with shared domestic and foreign ownership but not with fully owned foreign investments.
Endogenous growth theory has recently originated in economics. Building on this theory, this chapter conceptualizes the phenomenon of endogenous growth in terms of some new ideas developed in the field of international business (IB). These ideas have so far been not linked to the notion of endogenous growth. On the other hand, mainstream economics has not made much progress in exploring the MNC-government relationships through which growth-inducing "mechanics" are created, a topic of great importance and research in the IB-related discipline. Both MNCs and governments complement each other in facilitating an efficient matching of ownership-specific assets (notably knowledge) with location-specific advantages, thereby enabling the developing host countries to realize potential growth in an intensified manner, a new mode of endogenous growth that counteracts the law of diminishing returns. The phenomenon of MNC-cum-government-driven endogenous growth is thus conceptualized.
This paper investigates how subsidiary companies are able to contribute to the firm-specific advantages of the multinational corporation (MNC). Specifically we examine the determinants of the contributory role of the subsidiary and subsidiary initiative. The study reveals the following significant relationships: (a) internal subsidiary resources in combination with initiative have a strong positive impact on the subsidiary's contributory role; (b) subsidiary initiative is strongly associated with the leadership and entrepreneurial culture in the subsidiary; and (c) contributory role is strongly associated with subsidiary autonomy and a low level of local competition. We discuss the implications of these findings and some of the theoretical issues associated with subsidiary initiative. Our provisional conclusion is that MNC subsidiaries can not only contribute to firm-specific advantage creation, they can also drive the process. © 1998 John Wiley & Sons, Ltd.
Chapter 3 maps out the empirical research in the area of technology transfer via foreign subsidiaries. The bulk of the empirical work has been produced by econometric studies employing the production function approach and quantitative data. After discussing the methodological problems involved, a simple form of meta-analysis is employed to interpret the findings of nineteen studies from transition countries. However, this chapter also considers the newly emerging research from mezzo-analysis, which introduces qualitative data into the study. The general aim is to explore the methodological challenges, limitations and insights of the two approaches. This should allow us to develop a more thorough understanding of the current state of empirical research in the field. Moreover, extensions of existing work are suggested where appropriate, and potential new research trends are highlighted.
The Oxford Handbook of International Business contain articles by distinguished scholars in the field of international business. The authors are all authorities on their chosen topics and have been active as leaders in the Academy of International Business. Their articles survey and synthesize relevant literature of recent years. The book is split into five major sections, providing comprehensive coverage of the following areas: the history and theory of the multinational enterprise; the political and policy environment of international business; strategies of multinational enterprises; the financial areas of the multinational enterprise (marketing, finance and accounting, Human Resource Management [HRM], and innovation); and business systems in Asia, South America, and the transitional economies.
In 1995 the total sales of foreign-controlled affiliates of multinational enterprises (MNEs) exceeded the total world trade in goods and services of $6.1 trillion (WTO, 1996). Dunning (1993a) estimated that among major economies, such as Germany, the USA and the UK, MNEs account for approximately 80 per cent of trade in technology and managerial skills. In this chapter an attempt is made to identify and explain crossborder integration within established MNEs. Consideration is given specifically to the direction and the intensity of resource flows in goods and services, knowledge and capital that take place within the subsidiary network of an MNE. By examining the direction and magnitude of these resource flows, it is suggested, subsidiary strategy can be analysed along three major dimensions. This framework provides managers with greater understanding of global integration across subsidiaries.
To compete successfully in world markets, firms from emerging market and newly industrialized economies need to develop strategies to participate more broadly in the transnational value chain. More specifically, they need to move beyond cost-oriented commodity approaches that rely on low-cost labor and other resources to value-creating strategies that capture a greater share of the transnational value chain. This article presents six generic strategies appropriate for emerging market firms: low cost commodity, component manufacturing, private label manufacturing, low-cost leader, first generation technology, and specialized niche. The advantages and limitations of each of these strategies are discussed, as well as general guidelines for extending the firm's participation in the transnational value chain.
This article aims to review the large and growing literature on MNE subsidiaries, and to offer some perspectives on how it may evolve in the future. There is clearly some overlap between the content of this article-notably those concerned with the strategy and structure of the MNE as a whole, and the article about alliances and joint ventures in MNEs. What makes this article distinctive is its focus on the wholly-owned subsidiary company as the primary unit of analysis (where the subsidiary is defined as a value-adding activity outside the MNE's home country). The research reviewed here typically is concerned with the activities and/or responsibilities of the subsidiary company, and how the subsidiary company relates to other entities inside and outside the MNE. And from an applied perspective, it is typically directed towards the agenda of subsidiary managers.
The worldwide increase of foreign direct investment (FDI) in the past decades has given rise to numerous studies investigating the economic effects of FDI on the host economies. One frequently analyzed issue is that of technology transfer via foreign subsidiaries. Apart from the direct transfer of modem equipment and know-how from the parent company to the foreign subsidiary, especially the trickle down or spillover effects from foreign subsidiaries in favor of domestic firms caught researchers' attention. These spillover effects are expected to positively contribute to domestic firm's productivity. Consequently, spillover effects are of interest particularly for countries or regions in the process of catching up economically. Existing empirical studies on technology spillovers usually apply an econometric approach in which labor (or total factor) productivity is regressed on a number of independent variables. To measure spillovers, single variables are included in order to serve as proxy for the presence of foreign firms, usually the share of employment or sales in foreign subsidiaries in total industry employment or sales. A large number of econometric spillover studies exists for developing countries, the results of which, however, differ considerably. Recently, econometric spillover research has also been carried out for developed countries, especially EU member countries with structurally weak regions, not very surprisingly also with different outcomes. Blomstrom/ Kokko (1998), in their summarizing study about multinational enterprises and spillovers, conclude that the occurrence of spillovers depends largely on the country and sector observed. In particular, the positive effects of foreign investment are likely to increase with the level of local capability and competition. With the political changes in Eastern Europe and the beginning of transition, FDI for the first time grew strongly in these economies, as well. Especially the Econometric research of that type was pioneered by Caves (1974) and Globerman (1979) using cross sectional industry level data for Australia and Canada respectively. They found a positive impact of foreign investors on local firms. Prominent examples for spillover studies on developing countries are works by Blomstrom (1986), Blomstrom/ Wolff (1994), Kokko (1994), and Kokko (1996), who found a positive impact on productivity in the Mexican industry for the early 1970s. Aitken/ Harrison (1999) in contrast found a negative impact of foreign investors on productivity in Venezuela for 1976-1989. For the Indonesian manufacturing industry, Blomstrom/ Sjoholm (1999), Sjoholm (1999a), and Sjoholm (1999b) in turn found a positive impact on local companies (for various time periods between 1980 and 1991). For the Uruguayan manufacturing industry, Kokko et al. (1996) and Kokko et al. (2001) could not find a statistically significant impact of foreign subsidiaries on productivity. Kathuria (2000) and Kugler (2001) did not find statistically significant evidence for spillovers in India and Columbia, either. See for example: Girma (2003) and Driffield/Love (2002) for the UK, Ruane/Ugur (2001) for Ireland, Barrios/Strobl (2002) for Spain, etc. The Absence of Technology Spillovers from FDI in Transition Economies 151 candidate countries for EU enlargement - the most advanced and stable transition economies - received considerable amounts of FDI (see Figure 1). Fig. 1. FDI stock per head in CEEC 2002 (US $) Data source: WIIW (The Vienna Institute for International Economic Studies)AVIFO (Austrian Institute for Economic Research): WIIW-WIFO Database on FDI. 1994 instead of 1993 From the outset, foreign direct investment has been regarded as an important source of technology transfer in transition economies. As a consequence, the question of technology spillovers also caught the attention of researchers for this group of countries (e.g. Konigs, 2001; Bosco, 2001; Kinoshita, 2000; Smarzynska, 2002; Zukowska-Gagelmann, 2001). Thus far, however, econometric spillover studies on transition economies have hardly provided evidence for positive spillover effects on domestic firms. Some investigations even point out a negative impact on domestic enterprises. Explanations for the current lack of spillovers are provided only sparingly. Furthermore, there seems to be no consistent theoretical framework about technology spillover mechanisms. Empirical studies - be it on developing, developed, or transition economies - either take for granted that foreign subsidiaries somehow generate trickle down effects or they mention more or less exemplarily different channels for spillovers. Therefore, this paper will first develop a consistent and comprehensive theoretical framework explaining how technology spills over from foreign subsidiaries to domestic firms. This is followed by a presentation of the results of existing econometric spillover studies for transition economies. Finally, possible explanations for the obvious lack of technology spillovers will be deduced from an empirical qualitative study that takes an enterprise perspective.
This handbook synthesizes all the relevant literature on international business over the last forty years in 28 original chapters by the world's most distinguished scholars. The coverage is split into five main areas: the history and theory of the multinational enterprise; the political and policy environment; strategies for multinational enterprises (MNEs); managing the MNE; and regional studies—business systems in Asia, Latin America, and the transitional economies. A concluding section has two chapters, one on methodological contributions and the direction of research activity and the other on MNEs and public policy. The handbook is aimed at scholars and students of international business and international economics/politics, lawyers, managers, and policy makers.
In the early stages of development the accumulation of technology is influenced by factor endowments and intersectoral linkages.
In later stages the level of technological knowledge itself can become a source of comparative advantage, reflected in production
know-how, the design of capital goods, and a capacity for reverse engineering and imitative research and development. Evidence
shows that firms play a central role in this process and that, contrary to received wisdom, production capacity does not lead
automatically to technological capacity in developing countries. Market-related institutions tend to undervalue technological
accumulation; it is essential that the development banks do not follow suit in the projects and programs they finance.
This book discusses the development of a theory on the growth of the firm. It is shown that the resources with which a particular firm is accustomed to working will shape the productive services its management is capable of rendering. The experience of management will affect the productive services that all its other resources are capable of rendering. As management tries to make the best use of the resources available, a ‘dynamic’ interacting process occurs which encourages growth but limits the rate of growth.
This study reports the results of interviews with 65 managers in 11 German headquarters and in their 13 Hungarian subsidiaries. We focused on the role of the subsidiary with regard to market, product and value-adding mandates. Further, we investigated whether the Hungarian subsidiaries had experienced an upgrade of their role during the first 10 years of transition. The host country economy was supportive to role development, but inadequate subsidiary capabilities and headquarters ’ assignments prevented the subsidiaries from being upgraded. We propose that the corporate immune system, ie, ethnocentric behaviours emanating from the headquarters should be included in future upgrading analyses.
This paper investigates how subsidiary companies are able to contribute to the firm-specific advantages of the multinational corporation (MNC). Specifically we examine the determinants of the contributory role of the subsidiary and subsidiary initiative. The study reveals the following significant relationships: (a) internal subsidiary resources in combination with initiative have a strong positive impact on the subsidiary's contributory role; (b) subsidiary initiative is strongly associated with the leadership and entrepreneurial culture in the subsidiary; and (c) contributory role is strongly associated with subsidiary autonomy and a low level of local competition. We discuss the implications of these findings and some of the theoretical issues associated with subsidiary initiative. Our provisional conclusion is that MNC subsidiaries can not only contribute to firm-specific advantage creation, they can also drive the process. © 1998 John Wiley & Sons, Ltd.
Examines how major firms utilize R&D activities to create new businesses through internal corporate venturing (ICV). Using a qualitative method, this analysis was done for one large, U.S.-based high-technology firm. This firm has a new venture division, which was formed in the early 1970s. Data were obtained from the study of six major projects that were ongoing at the time of the research. This data collection included interviews with 61 firm employees involved in the projects. The key and peripheral managerial activities of the grounded process model of ICV and the flow of these activities through four venture stages are presented. The four major processes in the model are definition, impetus, strategic context determination, and structural context determination. Among the findings: It is usually the autonomous strategic initiatives of individuals at the operational level that provide the ideas for much of corporate entrepreneurship. As a result of the very autonomous nature of these initiatives, management has difficulty deciding how to deal with the new initiatives and often ignores administrative issues through the entrepreneurial process. Middle-level managers are found to play a key role in linking these autonomous initiatives to the corporate strategy of these diversified major firms. (SRD)
This paper focuses on the links between governance, firm capabilities and restructuring following the large-scale privatization process in Central and Eastern European transition economies using an integrative approach. Restructuring in these countries has been motivated by political and institutional changes and less so by market forces. Accordingly, political processes have produced political solutions such as “give-away” privatizations to insiders. These privatizations, in contrast to divestitures to outside owners, have realized less substantive restructuring because non-market incentives, such as too much managerial equity ownership, have created managerial entrenchment. In addition, we propose a connection between governance and organizational learning suggesting that learning is inhibited by excessive managerial ownership and lack of board knowledge regarding its oversight function. Furthermore, this entrenchment and poor board functioning may be perpetuated in financial-industrial groups, which have emerged as substitutes for market intermediaries in emerging economies. Thus, we propose that outside ownership involvement and the development of organizational capabilities may facilitate restructuring in the Central and Eastern European context. Our theoretical arguments are supported by case study evidence from transition economies.
This paper examines different channels of global technology transfer to transition countries. We study the impact of direct technology transfer through FDI, intra-industry knowledge spillovers from FDI, firm’s own R&D accumulation and R&D spillovers through trade for total factor productivity (TFP) growth of local firms. Using firm-level data for eight transition countries for the period 1994–1998, we found that technology is being primarily transferred to local firms through direct foreign linkages. Our results also suggest that FDI do not generate positive intra-industry spillovers for domestic firms.
Thesis (Ph. D.)--University of Reading, 2001.
This paper summarizes and synthesizes different strands of literature, to present conclusions on the potential role of multinational enterprises in regional economic development in the EC. The circumstances under which "development ' MNE subsidiaries may emerge in host regions are reviewed and possible routes to cluster formation and the generation of dynamic comparative advantage are explored. Policy issues are discussed, emphasizing the importance of investment in infrastructure, education and other public goods. -Authors
Considers in a preliminary way the influence of MNE global strategies on foreign subsidiary roles in Scotland, and from this some of the economic effects on the Scottish economy are highlighted. The study is based on a postal survey of MNE subsidiaries in Scotland, the responses being analysed using the statistical techniques of cluster analysis and discriminant analysis. Despite the weaknesses of the former technique in particular, the preliminary findings suggest substantial benefits to the economy from the one third of affiliates in the "strategic independent'/"product specialist' categories, as compared with the conventional branch plants ("rationalized manufacturers') and "miniature replica' subsidiaries. -Authors
This paper uses firm-level panel data to investigate empirically the effects of foreign direct investment on the productivity performance of domestic firms in three emerging economies of Central and Eastern Europe: Bulgaria, Romania and Poland. To this end, a unique firm-level panel dataset is used with detailed information on foreign ownership at the firm level. Two main questions are addressed in the present paper: (1) do foreign firms perform better than their domestic counterparts? (2) do foreign firms generate spillovers to domestic firms?
The estimation technique in this paper takes potential endogeneity of ownership, spillovers and other factors into account by estimating a fixed effects model using instrumental variables in the general methods of moment technique for panel data.
Only in Poland, do foreign firms perform better than firms without foreign participation. Moreover, for all three countries studied here, I find no evidence of positive spillovers to domestic firms, on average. In contrast, on average, there are negative spillovers to domestic firms in Bulgaria and Romania, while there are no spillovers to domestic firms in Poland. This suggests a negative competition effect that dominates a positive technology effect.
JEL classification: D24, F14, O52, P31.
Implementing a global strategy requires coordinating subsidiary activities across country locations. The assumption often made is that such coordination must be managed at headquarters. However, an alternate approach is decentralized-centralized responsibilities in which different subsidiaries within the multinational are given worldwide mandates to manage specific products or products lines. This study identifies subsidiary characteristics that are associated with receiving a global mandate by examining foreign subsidiaries located in France, Germany, Japan, U.K., U.S., and Canada.© 1992 JIBS. Journal of International Business Studies (1992) 23, 715–735
This paper analyses European Union FDI flows into the CEECs at a sector level, which is currently the less studied aspect of this issue. The aim is to understand whether and to what extent FDI in different sectors reacts to the same characteristics of the host countries. The paper first presents data that summarise the trend of FDI in the CEECs and, then, regression evidence that seeks to account for differences among sectors. A statistically significant positive association has been found between FDI and market size, wage differential, the stage of the transition process and the degree of openness of the economy as well. However, a statistically significant negative relation has been found for proximity to Europe and the degree of industrial concentration. This last effect suggests that strategic motivations completely offset the benefits generated by agglomeration economies. Controlling for sector specific effects, some differences emerge. Progress towards a market economy is relevant only in scale intensive and science based sectors, while labour cost is a potential attractiveness for foreign investors in traditional labour intensive sector and in science based ones. Also market considerations, proxied by the traditional gravity approach variables, affect FDI differently, depending on the industrial sector.
We survey the empirical literature analyzing the process of enterprise restructuring in transition economies. The survey provides new insights into the relative effectiveness of different reform policies, and into how this effectiveness varies across regions. We study the effects of privatization, the importance of different types of owners, the effects of foreign and domestic competition, the consequences of soft budgets, and the role of managerial incentives and managerial human capital, with regard to enterprise restructuring.
This paper uses firm-level panel data to investigate empirically the effects of foreign direct investment on the productivity performance of domestic firms in three emerging economies of Central and Eastern Europe: Bulgaria, Romania and Poland. To this end, a unique firm-level panel dataset is used with detailed information on foreign ownership at the firm level. Two main questions are addressed in the present paper: (1) do foreign firms perform better than their domestic counterparts? (2) do foreign firms generate spillovers to domestic firms?The estimation technique in this paper takes potential endogeneity of ownership, spillovers and other factors into account by estimating a fixed effects model using instrumental variables in the general methods of moment technique for panel data.Only in Poland, do foreign firms perform better than firms without foreign participation. Moreover, for all three countries studied here, I find no evidence of positive spillovers to domestic firms, on average. In contrast, on average, there are negative spillovers to domestic firms in Bulgaria and Romania, while there are no spillovers to domestic firms in Poland. This suggests a negative competition effect that dominates a positive technology effect.JEL classification: D24, F14, O52, P31.
Multinational companies and endogenous growth: An eclectic – paradigmatic approach. Working Paper No
- Ozawa
- Sergio Terutomo
- Castello
Ozawa, Terutomo and Sergio Castello (2001) Multinational companies and endogenous growth: An eclectic – paradigmatic approach. Working Paper No. 27, Economics series, East – West Center, Honolulu.
Integration through Foreign Direct Investment
- G Hunya
Hunya, G. (Ed.), 2000. Integration through Foreign Direct Investment. Edward Elgar, Cheltenham.
Managing Across Borders: The Transnational Solution Strategy and management in MNE subsidiaries The Oxford Handbook of International Business
- C A Bartlett
- S Ghoshal
Bartlett, C.A., Ghoshal, S., 1989. Managing Across Borders: The Transnational Solution. HBS Press, Boston. Birkinshaw, J., 2001. Strategy and management in MNE subsidiaries. In: Rugman, A.M., Brewer, T.L. (Eds.), The Oxford Handbook of International Business. Oxford University Press, Oxford, pp. 380–401.
Adjustment of Hungarian engineering companies to the globalising corporate network Small Economies' Adjustment to Global Challenges
- A Szalavetz
Szalavetz, A., 2000. Adjustment of Hungarian engineering companies to the globalising corporate network. In: Bara, Z., Csaba, L. (Eds.), Small Economies' Adjustment to Global Challenges. Aula Publishing Ltd., Budapest, pp. 357–376.
High-tech sector in the Central Europe: is it a real or statistical effect? The Knowledge-based Economy in Central and Eastern Europe: Countries and Industries in a Process of Change
- M Srholec
Srholec, M., 2006. High-tech sector in the Central Europe: is it a real or statistical effect? In: Piech, K., Radosevic, S. (Eds.), The Knowledge-based Economy in Central and Eastern Europe: Countries and Industries in a Process of Change. Palgrave, London, pp. 57–78.
Foreign Direct Investment and Intra-industry Spillovers. UNECE, Geneva available at: www.u-nece.org/ead/ffd.htm The absence of technology spillovers from foreign direct investment in transition economies Structural Change and Exchange Rate Dynamics
- H Gorg
- D Greenaway
Gorg, H., Greenaway, D., 2002. Foreign Direct Investment and Intra-industry Spillovers. UNECE, Geneva available at: www.u-nece.org/ead/ffd.htm. Gu ˝ nther, J., 2005. The absence of technology spillovers from foreign direct investment in transition economies. In: Welfens, P.J., Wziatek-Kubiak, A. (Eds.), Structural Change and Exchange Rate Dynamics. Springer, Berlin, pp. 149–166.
International industrial networks and industrial restructuring in central Europe, Russia and Ukraine. Dordrecht: Kluwer. 27 Global Resource Flows and MNE Network Integration in
- Slavo Radosevic
Radosevic, Slavo and Bert. Sadowski (eds) (2004) International industrial
networks and industrial restructuring in central Europe, Russia and Ukraine. Dordrecht:
Kluwer.
27. Randay, Trond. and Jiatao Li (1998) Global Resource Flows and MNE Network
Integration in J. Birkinshaw and N. Hood (eds), Multinational Corporate Evolution and
Subsidiary Development. London: Macmillan, pp. 76-101.
Direct Investment in Economies in Transition: Making Central European industries competitive
- Klaus Meyer
Meyer, Klaus (1998) Direct Investment in Economies in Transition: Making
Central European industries competitive. Cheltenham: Edward Elgar.
FDI spillovers in emerging markets: A Literature review and new perspectives Centre for New and Emerging Markets, London Business School Mutlinational Firms in the World Economy Multinational companies and endogenous growth: An eclectic – paradigmatic approach
- Klaus Meyer
Meyer, Klaus (2003) FDI spillovers in emerging markets: A Literature review
and new perspectives. DRC Working Papers No. 15, Centre for New and Emerging
Markets, London Business School, London.
22. Navaretti, Giorgo Barba and Anthony J. Venables (2004) Mutlinational Firms in
the World Economy, Princeton University Press, Princeton, NJ.
23. Ozawa, Terutomo and Sergio Castello (2001) Multinational companies and
endogenous growth: An eclectic – paradigmatic approach. Working Paper No. 27,
Economics series, East – West Center, Honolulu.
Spillovers in the Polish food industry – exploring the role of local externalities and global networks Centre for East European Studies Empirical studies: approaches, methodological problems and findings
- Camilla Jensen
Jensen, Camilla (2002) Spillovers in the Polish food industry – exploring the
role of local externalities and global networks. Working paper No. 14, Centre for East
European Studies, Copenhagen Business School, Copenhagen.
16. Jindra, Bjoern (2006) Empirical studies: approaches, methodological problems
and findings, in Stephan, Johannes (ed), Technology Transfer aia Foreign Direct
Investment in Central and Eastern Europe, Palgrave Macmillan, London., pp. 30-71.
Evidence from a Panel of Large Polish Firms Tomasz Mickiewicz
- Corporate Privatisation
- Employment Control
- Growth
Privatisation, Corporate Control and Employment Growth: Evidence from a
Panel of Large Polish Firms, 1996-2002'
Tomasz Mickiewicz, Christopher J Gerry and Kate Bishop
46
Wage Bargaining, Privatisation, Ability to Pay, and Outside Options -Evidence
from Hungary
Janos Köllo and Tomasz Mickiewicz
45
Informal Practices in Changing Societies: Comparing Chinese Guanxi and
Russian Blat
Alena V. Ledeneva
44
The determinants of foreign direct investment in the CEECs: New evidence form sectoral patterns
- Laura Resmini
Resmini, Laura (2000) The determinants of foreign direct investment in the
CEECs: New evidence form sectoral patterns. Economics of Transition, 8(3): 665-89.
Modelling the Impact of Economic Integration on Multinational's Strategies. University of Reading Discussion Papers in International Investment and Management
- A T Tavares
Tavares, A. T. (1999) Modelling the Impact of Economic Integration on
Multinational's Strategies. University of Reading Discussion Papers in International
Investment and Management, No. 254. Reading: University of Reading.
Spillovers in the Polish food industry-exploring the role of local externalities and global networks. Centre for East European Studies
- C Jensen
Global resource flows and MNE network integration
- Randay
The effects of FDI on domestic firms
- Konings
Adjustment of Hungarian engineering companies to the globalising corporate network
- Szalavetz