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Zemplinerová, Alena --- "The importance of foreign-owned enterprises in the catching-up process" [2004] ELECD 155; in Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris (eds), "The Economic Potential of a Larger Europe" (Edward Elgar Publishing, 2004)

Book Title: The Economic Potential of a Larger Europe

Editor(s): Liebscher, Klaus; Christl, Josef; Mooslechner, Peter; Ritzberger-Grünwald, Doris

Publisher: Edward Elgar Publishing

ISBN (hard cover): 9781843769620

Section: Chapter 10

Section Title: The importance of foreign-owned enterprises in the catching-up process

Author(s): Zemplinerová, Alena

Number of pages: 13

Extract:

10. The importance of foreign-owned
enterprises in the catching-up
process
Alena Zemplinerová1

1. INTRODUCTION

In 2003, the stock of foreign direct investment (FDI) in the Czech Republic
reached about USD 40 billion, which is the highest FDI stock per capita in
Central and Eastern Europe. Whereas the world economy and Central and
Eastern Europe (CEE) countries including Hungary and Poland experi-
enced a decline in FDI inflows, FDI flows to the Czech Republic in fact accel-
erated in recent years2 ­ not least because of the special efforts the Czech
government has made since 1998 to attract strategic foreign investors during
the privatization of large banks and utilities as well as through incentives for
green-field development. Against this background, an issue of current inter-
est is whether FDI actually enhances welfare, which basically depends on
how FDI enterprises perform and how they are distributed among sectors.
Traditional trade theory analyses FDI as capital imports. Yet the modern
theory of industrial organization assumes that firms which have the
resources to operate internationally possess certain assets (technology,
managerial skills, access to credit) that give them technical and organiza-
tional advantages over domestic firms. Therefore foreign firms might have
other characteristics than domestic firms, and FDI might have additional
effects beyond the mere import of capital (Caves 1996). So far empirical
studies examining the performance of foreign-owned enterprises (FEs) have
been inconclusive. Studies have found FEs to perform better than domestic
ones and vice versa (Pfaffermayer and Bellak 2002, ...